Case Study Smart Phone Industry in India

Mobiles

1. Ultra Low-cost Mobile Handsets (ULCMHs)

2. Low-to-medium cost Mobile Handsets (LCMHs)

3. High cost Mobile Handsets (HCMH)

4. Smartphones

Price Range: Price Range: - Less than Rs 1500 - Key features include B&W screen, messaging and handbook Price Range: - Rs 1500 to Rs 2500 - Key features include colored screen, FM radio and VGA screen - Rs 2500 to Rs 4000 - Key features include GPRS,extendible memory, MP3 player, and digital camera

Price Range: - Greater than Rs 4000 - Key features include application installation, QWERTY Keypad/touch screen, dual SIM, Wi-Fi and 3G

Smart Phone Industry Globally, Smartphone Market grew 61% in 2011 with total shipment volumes reaching 491.4 million units in 2011, a whopping increase of over 304.7 million units in 2010. In comparison to Global Smartphone Market, growth in India is expected to be even higher According to India Smartphone Outlook for 2012, India will witness 100% growth in 2012, with total smartphone shipments expected to reach 20 million units.

Indian Smartphone Vendor Market Share in 2011 It is interesting to note that Nokias still leads the Smartphone Market share, however, it has seen a major fall in 2011. Nokia lost about 50% of its market share from 60% at the start of the 2011 to sub 40% by the end of the year.

Samsung on the other hand has witnessed significant growth and has close to 30% of Indian Smartphone market share. One thing to note is that Indian vendors like Micromax, Lava & others have not been able to replicate the same success in smartphone segment as they did for feature phones. OS-wise Smartphone market share [2012 Forecast] According to Convergence Catalyst, Android is expected to capture over half of Indian Smartphone Market Share by end of 2012.

Another Mobile OS, Bada, is also expected to gain significantly taking its Indian market share to 10.2%. On the other hand, Nokia is expected to halve to 23.3% in 2012. Blackberry is also expected to slide from 13.3% market share last year to 9.9% by end of this year. Key Indian Smartphones trends for 2012
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Emergence of multiple SIM Smartphones Samsung has already launched Dual-SIM Smartphones such as Galaxy Pro Duos and Wave Y Duos and is expected to launch Dual-SIM capability on its more popular lineup such as Galaxy Y and S II. As more India OEMs launch Smartphones, we expect to see more Dual-SIM smartphones in the market through them. We also expect devices that support both GSM and CDMA, especially in high end smartphones.

Global players to capitalize their strengths in India While OEMs such as Nokia and Blackberry have traumatic global challenges, they are expected to continue to be significant in India given their strong brand presence, distribution network and consumer affinity in India.

Carriers to continue experimenting with contracts for Smartphones In 2011, MTS launched a Smartphone (HTC Pulse) on contract for the first time with moderate success. This initiative has opened up the potential for other players and we expect a few other carriers to experiment with this model on an opportunistic basis to improve their competitive edge

Top Five Worldwide Smartphone Vendors Market in 2011

Vendor Samsung Apple Nokia Research Motion HTC Others Total In

FY 2011 FY 2011 FY 2010 FY 2010 Shipment Market Shipment Market Year Over Volumes Share Volumes Share Year Change 94.0 93.2 77.3 51.1 43.5 132.3 491.4 19.1% 19.0% 15.7% 10.4% 8.9% 26.9% 100.0% 22.9 47.5 100.1 48.8 21.7 63.7 304.7 7.5% 15.6% 32.9% 16.0% 7.1% 20.9% 100.0% 310.5% 96.2% -22.8% 4.7% 100.5% 107.7% 61.3%

Top Five Worldwide Smartphone Vendors Market Share Changes

Apple: Apple regained its market leader position by launching iPhone 4S worldwide. It also reached a new shipment volume record for itself and for the entire industry for a single quarter. The holiday season, delay in the product launch from 3Q to 4Q and the addition of multiple mobile operators has helped Apple achieve this record. The much hyped 4S has left few Apple fanboys disappointed as it lacked 4G LTE connectivity or a different size screen.

Samsung: Samsung too had its share of milestones. It broke the 30 million units mark for the first time and also posted the largest year-over-year increase of the top lot (yeah true!! Who bothered about Samsung phones couple of years back ;)). Samsung also has concentrated on expanding in all kinds of market with Galaxy S2, Galaxy Nexus in the high end sector, Galaxy Ace and galaxy Y in the mass market. The biggest achievement for Samsung though was that it managed to marginally beat Apple in terms of number of units shipped! Nokia This is something which Nokia wouldnt be proud of Nokia posted the largest year-overyear decrease amongst the top manufacturers. But, Nokia has been in news again for good reasons due to the release of first set of windows smartphones Lumia 710 and the Lumia 800. Nokia claims that it shipped over a million units in its debut quarter. However, the Symbian phones are losing their charm and Nokia could stop shipping these Symbians soon. Blackberry 2011 has been a mixed bag of results for RIM (Blackberry). Firstly, the good things The new BB OS 7-powered BlackBerry phones reached new markets. And then the not so good things the global network outage in October (I almost died laughing at few of the jokes on BB!). Also the news that the first BB 10-powered smartphones will arrive only by the end of year 2012 has left the BB fans disappointed. HTC HTC has timed its releases quite well and it has been releasing the smartphones from time to time. It not only relied on Android smartphones but also released Windows Phones like Titan and Radar models. This strategy of HTC catered to both the mobile operators as well as the customers quite a well. However, when compared to the last quarter, HTC has shipped less number of phones

Discussion Questions: 1. Why is oligopoly behavior more like a game of poker than the behavior of firms in more competitive markets? 2. What are the barriers to entry?

3. What does it mean that firms in oligopolistic markets are inter-dependent of one another? 4. 5. 6. 7. List factors that influence demand and supply, and identify their application in business Apply the marginal principle to determine the profit-maximizing price and output. Why is market more contestable? technology, Android tocuh base, hardware, open source Rule of 3

Chart III: Significant Reduction in Call Tariffs and Minutes of Usage (MoU)
Source: TRAI. PwC Analysis

Source: TRAI (Telecom Regulatory Authority of India). ITU.

Comparison of Number of Players in India and Selected Other Countries, March 2011

Revenue per Minute of Mobile Calling, India and Selected Developed and Developing Countries, USD, Q4-2010

Way Forward The Indian mobile subscriber base is likely to sustain the rapid growth recorded in the past few years. Presence of skilled labour pool, improving telecom infrastructure, favourable demographics, rising disposable incomes of consumers, declining tariffs, increasing demand, growing attraction for mobiles with new features and greater availability of handsets at lower prices, are expected to continue driving the growth of the telecom sector, going forward. However, the companies are likely to encounter a more challenging business environment in the near future, given the sustained fall in ARPUs, rapidly increasing competition and consequent pressure on margins and regulatory risks. Companies with good rural coverage, better operational efficiency, and superior quality of service are likely to stay ahead of competitors. The government has proposed to achieve a rural tele-density of 25% by deploying 200 mnconnections at the end of the Eleventh Five Year Plan, given that more than 70% of the population lives in villages. The optimum utilisation of USO fund and increase in mobile services might help the government attain this goal. The governments thrust on welfare programmes such as community development, education and health and rural connectivity can also be facilitated through satellite communications, internet connections et al. Besides, broadband connections for all gram panchayats and public healthcare centres, secondary and higher secondary schools and provision of 3G services to all cities/towns with more than 0.1 mn population is also likely to be achieved during the Eleventh Five Year Plan. It is also visualised to link block headquarters and the nearest exchange through the State-Wide Area Networks (SWAN) connectivity. Major initiatives such as e-Agriculture, e-Health, e-Education, rural BPOs are slated to increase internet penetration as they set the base for increasing acceptance of the same. During the Eleventh Five Year Plan period, Rs 2,670 bn worth of investments are projected to be made in the telecom industry and the public sector is expected to have a 33.50% share in the same,

while the private sector is expected to contribute 66.50%. Further, a total of 650 mn connections (including 66 mn wired and 584 mn wireless connections) are expected to be achieved by the end of 2012. The growth process in this ever-evolving sector needs to be backed by a strong R&D support. The active participation of the private sector in R&D would ensure greater benefits for the sector. Further, the government also envisions making India a hub for telephone equipment manufacturing that is expected to be achieved through telecom specific special economic zones (SEZs) and by setting up Export Promotion Council to promote export of telephone equipment and services.