Cellular phones are relatively new to India. Hence, the cellular handset market is clearly driven by the developments in cellular services. And last year has been a poor one for cellular services. The metros have seen a decline in subscribers to cellular services. And whatever growth has happened has been in the circles. This meant good sales of entry-level cellular phones which were sold at a price comfortable to mass-market consumers. The higher priced models had a very lean period.

Unit Sales

The total unit-wise market for cellular handset largely depends upon newly activated cellular subscriptions. The cellular operators enrolled about 317,511 new subscriptions across India during the fiscal 1998-99. Roughly three lakh cellular handsets were traded. The total number of legal handset sales was 142,880, clearly indicating that legal trading accounted for 50 percent. Remaining sales occurred in the grey market. Giving about 9 percent for the second hand trading, the total number of actual cellphone sales during last year was approximately 130,021.

Revenues

Revenue-wise, the handset market was clearly divided into the low-end models and the premium models. Low-end handsets had an entry-level price tag. These were the operators’ ostensible choice for bundling with airtime options. The average cost of this type of handsets was Rs 8,000. On the other end of the spectrum were the premium models, which included Internet/e-mail receivable phones and were packed with all value-added compatibilities. With a price tag of above Rs 20,000, these were beyond the reach of mass buyers. There were also some models which bordered around the low-end entry-level models but were branded as "value for money" models. Some of features available on them were not available in the entry-level phones.

The entry-level phones dominated the market with a negligible number of premium handsets being also traded. The total revenue-wise market for cellular phones adds up to approximately Rs 144 crore.

The Indian market is still in a nascent stage. The grey market is very dominant and the brands, available legally, are sometimes illegally available in the many bustling supermarkets of the metros. Often the challenge for legally traded brands has been to challenge the markeshare of their counterparts in the grey market rather than their legal competitors. Six well-known brands are sold legally by vendors through cellular operators and well-known retailers. They are Alcatel, Ericsson, Motorola, Nokia, Philips, and Siemens.

Trends

• The most significant trend during last fiscal was the exchanging of cellular handsets from subscribers to subscribers. The second hand purchase of cellular handsets had risen to a high of about 12 percent by the end of 1999. Slackening cellular business and an equally dull response from customers led to this phenomenon. The rise in cellular rentals during the last fiscal meant many of the non-serious owners ending their subscriptions and selling off their handsets. However, with cellular airtime tariffs coming down considerably and incoming calls becoming free, this trend is expected to slow down in the current year.
• A much better market is forecasted this year. The reason is that the subscriber base is likely to be on the growth path once again. A lot of cost-conscious users are likely to be encouraged by the exemption of tariff on incoming calls.
• Prices remained the most important factor in the choice of cellular phones. In many cases, bulks of cellphones have been sold through schemes in which free airtime was bundled along with handsets.
• Aesthetics was the next most important factor. Cellphones that appealed to the trendy crowd, ones that appealed to the successful executives, cellphones that could be fitted into the tiniest of pockets … they all had specific targets. But, all of them had to suit the Indian taste. Gizmos were out of fashion and light, small, and colourful models were the order of the day.
• Feature phones are not yet popular. It implies that cellphones in India will be an essential item rather than the often mistaken status symbol. However, it will be an exciting new mode of communication that will increasingly entice newer consumers. The new generation is the most potential target segment.

Pagers

It was a bad year for the paging industry. The industry saw major churnouts across the country and across all operators. The installed base of pager saw a decline from 7.5 lakh (V&D estimate) in March 1998 to approximately 6.7 lakh in March 1999. Consequently, there weren’t any significant developments in the pager market.

• Pager was mistaken as a consumer durable right from the beginning of paging services. Operators went to the extent of giving it away free with movie tickets, washing machines, televisions, etc. The result—enormous number of pagers got churned out. Most of the recipients of the free pagers did not know what to do with the pagers.
• Bundling as such is not a prohibitive practice. Cellular industry also went for it, as did other electronic goods like television and washing machines. However, bundling of pagers was one of the biggest marketing slips. One, since it was the start of a communication services which was different from the plain old telephone services, people had to be first educated about the real benefits. Two, bundling it with every other consumer goods washed out any novelty attached to a new gizmo. And three, paging was not able to focus on specific targets of consumers unlike cellular or radio trunking.
• The ratio of numeric to alpha-numeric pagers was 25:75. However, by the end of last fiscal it was 20:80.
• Prices of pagers remained almost constant during last fiscal. Average price was in the region of Rs 2,200.
• It was a very dull market, with no significant developments. Unlike the cellular phone market that saw newer models being launched in spite of slowdown in subscriber growth, the pager market did not see newer players, apart from Groupsense that emerged as a powerful name to reckon with. It forged tie-ups with Punwire and SM Elecronics for manufacture of its pagers.
• There were six main vendors of pagers. They were Motorola, SM Electronics, Casio, NEC, Philips, and Punwire. Out of these, Motorola was the clear leader. In a bad year, the competitors were not much in sight. And Casio lost its partnership with Bharti Telecom for manufacture of pagers, with JV Casio Bharti getting down to closing its operations. However, it was Groupsense that made an impact on the market.
• Nonetheless, it was the standard models like the Memo Express that ruled the roost. There were hardly any product innovations, unlike during the previous year when a number of pagers became compatible for bilingual reception of messages.
• It has been the institutional employees and large corporates who have been the loyal users of pagers. And it would augur well for the pager operators to tap this segment. The other vertical segment could be the vast number of government employees, especially in the security and emergency departments.