Low cost handsets driving Indian mobile growth

With operators beginning to roll out cellular services in rural and semi urban areas, low cost handsets are driving India's mobile growth story. According to a report from the Yankee Group mobile handsets costing less than $50 account for 62 per cent of all imported units. The study points out that low cost CDMA handsets are more popular than the GSM ones in this category.
"Very low-cost (defined as sub-US$50) handsets have become integrally important to the Indian cellular market's astonishing growth. Sub-$50 models accounted for 62% of all imported units between January and October 2007. CDMA models from 13 vendors dominate this category, comprising 78 per cent of all sub-$50 imports," said the Yankee Group. While this is good news for mobile users, for handset manufacturers such as Nokia popularity of low end phones means lower margins. In order to cut down on costs Nokia is manufacturing most of the low end phones from its plant in Tamil Nadu. Whats also working for handset vendors is the huge volumes in the market. Nokia for instance earned 3.9 billion Euros in India. The Indian cellular market continues to add new subscribers at a world-leading rate of between 7 and 8 million users per month. "A number of factors including, but not limited to, service provider competition, service quality, brand affinity, effective marketing and distribution, device vendor competition, increasing per-capita GDP, and general demand factors such as choice, are driving growth. The broadening availability of ultra low-cost handsets (defined as sub-US$35) is also becoming one of the key drivers to subscriber growth," the study pointed out.
A comparison of GSM versus CDMA sub-$50 import volumes shows that sub-$50 CDMA imports outpaced sub-$50 GSM imports by a factor of approximately 3.5 times for the period. In terms of average selling price the CDMA handsets were found to be much cheaper than GSM low cost handsets. There are around 60 very low cost CDMA models from 13 vendors making it a highly competitive sector. This price gap between CDMA and GSM has, however, narrowed with the introduction of sub-$30 GSM imports from August to October. "Total market leader Nokia's contribution to sub-$30 GSM volumes increased from 15 per cent from January to July to 22 per cent from August to October," said the study.