Expansion Strategy
Almost all handset manufacturers have a well-planned distributions system, starting with national distributor and ending with the retailers. In terms of distribution, there is a clear demarcation between CDMA and GSM phones. CDMA is distributed directly through operators, except Nokia and Motorola, which distribute handsets through Brightpoint, whereas in GSM, it is through open market. Nokia phones are distributed through HCL Infosystems, but with the market expanding, the company is looking at direct sale of handsets. The company has a wide reach in terms of retail distribution, as it is available in 90,000 retail outlets across India and is catered by around 800 distribution points. And, in terms of coverage, it is present in around 5,000+ towns. The company is also planning for a massive expansion in towns and villages, and is at par with the massive expansion plans of service providers.

Motorola has two national distributors-Bharti Teletech for GSM handsets and Brightpoint for the CDMA model. With these 2 national distributors, Motorola handsets are available in 32,000 retail outlets covering 200 towns across the country. "In order to achieve success in India, we need to go where India lives-the villages," says Lloyd Mathias, director marketing, Motorola India. The company also has a distribution system through various rural retail initiatives like Haryali Bazaar stores of DCM Sriram, ITC e-choupals and Godrej's Aadhar store. These stores mainly cater to needs of rural people. "For rural areas, one has to set up a viable model by piggy-backing on the existing distribution model where focus would be on cross player tie-ups, use of existing channels like the postal department, public distribution system and others," opines James V Abraham, VP and director, The Boston Consulting Group India. Some manufacturers have already started taking steps towards this. According to Payal Gaba, head marketing, Spice India, "We are in talks with the postal department to sell our products through them." Also, Spice group follows a reverse distribution system, unlike other players in the same field where the company's distribution system starts with national distributors and reaches the retailer at the end of the string. Spice started with retailers and on the way reached micro distributors at the district level and at the end reaches regional distributor, which could be at the state level or national level. Currently, Spice has 36 regional distributors and 375 micro distributors catering to 20,000 retail outlets across India.

With the kind of growth that is expected from rural India, with metros and 'A' category circles reaching the saturation point, almost all handset vendors are heading to cater to the rural mass. A Boston Consulting Group report suggests a huge number of retail outlets are going to be set up in these geographies by 2010. In terms of retail outlets, the metros presently have around 45,000 outlets and rural India have around 30,000 outlets. But in 2010, the metro outlets will increase to 60,000 whereas in rural India, it is expected to increase to 140,000 outlets. The reason for this tremendous increase is that 60% additions are planned from rural India, adds Abraham.

Chinese handset vendors are heading towards India, equipped with low cost low-end phones with an eye on rural Indian markets. So this is going to see cut throat competition among other players too, which is a good sign for the people in rural India, as it would propel the cost reduction of handsets.

Future Challenges
One area of concern has been the slow progress on the rural mobile telephony front. Rural teledensity continues to remain at around 2%. Most of the growth has been in urban areas and if the target of 500 mn by 2010 is to be achieved, the private operators need to extend their urban success story to rural areas. Meanwhile, the government also aims to provide mobile access to all villages with population of more than 1,000 by the year 2007. These targets are not difficult to achieve but depend on whether private operators will be willing to cooperate with state telcos on this.

Handset manufacturers are looking at how to increase localization of components as it will help in reducing costs and will open up new markets in B and C category towns. On the distribution front, the vendors have to increase their coverage area from present 5,000 to 6,000 cities, towns and villages. Not an easy task, as one has to also provide after sales service in all these cities. All this if properly tackled will help India to achieve 500 mn by 2010 and bring smiles to the mobile handset industry in the country.

Gyana Ranjan Swain
gayanas@cybermedia.co.in
(with inputs from Pravin Prashant)