Big in Volume, Low in Value

With BSNL and MTNL as the biggest buyers, the telephone largely remains a low value product.

The telephone equipment or the electronic push button phones market in India can broadly be divided into three categories—the BSNL-MTNL market, the private basic services market and the retail market. The retail market would also comprise of PBX manufacturers. Besides, the retail market includes both the simple push button phones as well as feature phones. While the simple electronic push button phone market was estimated to be worth Rs 291 crore (11.64 million sets), phones with such enhanced features as memory, hands-free dialling, and caller line identification had a market worth Rs 54 crore. Even though there was an addition of around 1.1 lakh sets in the feature phone market in 2000-01, the market in value terms actually decreased largely because of a 25 per cent decline in the average price of a feature phone. The feature phone market size in 1999-2000 was around 2.5 lakh sets worth Rs 55-60.

EPBT Market Segments

BSNL and MTNL were the biggest buyers of the electronic push button phones accounting for 70 percent of the market. The retail segment and the PBX manufacturer brought around 25 percent of these phones. The private basic operator segment was an emerging market though its share was not more than 5 percent.

It is expected that in the near future, demand in the private basic operator segment would overtake the demand in the retail and PBX segment and account for 30 percent of the total market.

Price

The market for both the simple electronic push button phones as well the feature phones was highly competitive with high overhead costs. While the former sold at an average price of Rs 250, the latter had an average price of Rs 1,500, down 25 percent from the 1999-2000 price of Rs 2,000. While at the lower end of the market, feature phones cost as little as Rs 500, phones with a combination of features cost upwards of Rs 2,000. There was hype around Caller Line Identification (CLI) feature, but that was confined to the metros. Otherwise, the most sought-after features in these phones were hands-free dialling, memory and LCD display. The CLI phone market did not grow much because of factors like compatibility of the local exchange and the extra charge that users had to pay for activating CLI feature in their phones.

Trends in the Feature Phone Market

Among the Indian brands Orpat remained the cheapest one, though it was hit by even cheaper imports from China. Chinese products were popular but solely because of their low costs. They did not pose a threat to the market where people were looking at buying features rather than saving money. Buyers looking at features were usually unwilling to take risks with unknown brands. But, phones donning the name ‘Panaphone’ a Panasonic namesake, appeared to be doing good business as was felt by many established Indian manufacturers. The grey market remained significant but lost its dominance because of the growing legal sale of the phones popular in this market. Panasonic and Sony were the most sought-after phones in the grey market.

There was not much activity in the ISDN phone market. The size of the market in terms of value was in the region of Rs 35-40 lakh. Not more than 5,000 phones were sold in this segment. Of these, around 1,000-1,200 phones were sold in the retail market; bulk buyers like the switch vendors bought the rest. The base price of an ISDN phone available in India was Rs 7,500. The main segments of buyers in the retail segment included corporates, SOHO and residences. As for the players, Ascom cornered the major portion of the market.

EPBT Manufacturers

While Bharti Teletech and its group companies made a modest profit of Rs 6 crore, the other major player Tataphone saw red with a loss of Rs 13 crore. The downturn in the fortune of Tataphone was due to a drop in prices and an increase in the cost of production. Prices dropped because of stiff competition among the players as also due to a reported move by some of the manufacturers to form a cartel for BSNL bids.