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The fixed phone equipment market showed a slow but consistent growth in FY 2005-2006. The market is shifing towards mobile phones and with number of IP phones increasing as VoIP is getting acceptance in enterprises, fixed phones are facing a tough time. Despite this, fixed phone vendors have learnt to evolve their products in tandem with the changing demands of the consumers and maintain their presence in the market.

According to TRAI, the total number of fixed line subscribers as on March 31, 2006 was 49.7 mn. Although the buzzword in the fixed phone segment today is the adoption of fixed wireless phones (FWP) but there was a downswing in the FWP market. The traditional fixed phones saw a number of technical advancements in FY 2005-06.

The fixed phone market is estimated to be at Rs 349 crore, with a growth of 26.4%.

According to  VOICE&DATA estimates Bharti Teletech emerged as the leader in the traditional fixed phone segment, with revenue of Rs 224 crore and around 64.2% market share in FY 2005-06. National Panasonic settled for the second position, with a market share of about 27.2%, and revenue of Rs 95 crore, although it had the highest growth rate of 63.8%. The other players including BPL, ITI, UTL and other Chinese vendors in the grey market, had 8.6% market share, with revenue of Rs 30 crore.

In FY 2005-06, the majority of the sale of traditional fixed phones happened in the retail market. Bharti sold 22 lakh phones. BSNL and MTNL again emerged as the largest buyers. They bought 12 lakh phones from Bharti Teletech, which were used for more replacement than for new connections. Other private players, which include HFCL and Airtel, bought 800,000 phones.

Exports in this segment saw a rise of 65%. Bharti entered into a strategic alliance with Asia Thompson to manufacture corded phones to be sold under the brand of GE. This has put Bharti in the league of the few companies that are competing  the Chinese as fixed phone manufacturers. Indian phones are being exported to countries such as Mauritius, Vietnam and South Africa.

The grey market is also dominant in the fixed phone segment. Around 50% of the retail market phones are from China, which constitute the grey market. The prices of Indian instruments have come down heavily and thus the share of the gray market is going down.

Fixed Wireless Phones
LG maintained its ace position in the FWT segment, with the estimated revenue of Rs 778 crores and the market share of 53.7% in FY 2005-06. Huawei took the second position, with Rs 253 crore in revenue and  about 17.4% market share, followed by Axesstel with revenue of Rs 191 crores and market share of 13.2%. ZTE posted a revenue of Rs 105 crore, with 7.2% market share. Next in line was Pantech Curitel, with revenue of Rs 78 crore. The revenue generated by other players in the market was Rs 45 crore, and this gave them a market share of 3.1%.

LG maintained its dominance in Reliance, whereas Axesstel bagged a big order from Tata Teleservices. Huawei provided 6,25,000 phones to BSNL. Pantech Curitel also bagged an order for 1,50,000 phones from MTNL in FY 2005-06.

The FWP segment recorded a decline of around 11.4% in revenue for FY 2005-06, as compared to FY 2004-05. This can be attributed to the significant decline in the prices of handsets, due to a stiff competition among the industry players.

Back With A Bang
The fixed wireless telephone market remained service provider driven. Although the fixed wireless were preffered mainly because of the instant connectivity that they provide. The prices of FWPs were significantly lowered in FY 2005-06. This led to about 11.4% decline in revenue of the segment. FWPs that are being offered by the service providers are laden with features such as SMS, voice, data, FM radio etc. This is making them popular among the subscribers. 

Fixed phones are back in vogue, mainly due to the advent of broadband and investment by private operators. Although BSNL and MTNL have recorded nearly static growth rates, private players did see some growth in this segment, but not as much as the mobile phone market.

The face of the fixed phone market is changing towards more innovative products. The demand of feature-rich phones in the fixed line is increasing. Owing to the rise in the purchasing power and awareness among the consumers, the fixed phone segment is experiencing the demand of same features that are available in the mobile phones. Industry players are incorporating their handsets with features such as backlit keypads, caller ID, and speakerphones. The latest feature that will rock the fixed phone market would be ringtones and SMS enabled phones.

The rationale behind making wired phones SMS enabled, is to steal a pie of the huge messaging market, which is dominated by mobile operators. Although in terms of quantity, basic phones are sold more but corporate customers are looking for phones with a variety of features. 

Another area, which holds immense potential, is the 2.4 GHz digital phone, for which the government has allowed the bandwidth this year. These digital phones offer immense advantage over analogue in terms of range and voice clarity. Bharti Teletech launched  six models for 2.4 GHz digital phone segment in FY 2005-06.

Outlook
The fixed phone market is likely to continue to be led by broadband. In April 2006, the total number of broadband connections in India stood at 15 lakh. Government initiatives to popularize broadband, and with private operators rolling out aggressively to meet the challenges posed by a lucrative broadband market, fixed line telephony is becoming attractive. The lower costs than the GSM phones is an advantage for fixed phones, as it will ensure that they survive the market. Demand of feature-rich phones, digital cordless phones and FWP will grow significantly.

The market is expected to see consistent growth in future. The demand for full duplex phones and clip phones, working without local power source, will be high. The prices of handsets are expected to drop further and the number of fixed phones will pick up in the next few months. The challenge for the players will be to keep in mind the market trends while developing products. They need to remain lean and cost effective, and should provide affordable options to the consumers to maintain their position in the market.

Sonia Sharma
sonias@cybermedia.co.in