Technology

India's Mobile Phone Hitmaker


On a hot summer afternoon in 2007, executives at a small Indian pay phone company called Micromax noticed a curious sight. In a village in the eastern part of the country, they watched people line up next to a man with a car battery strapped to the back of his bicycle and hand him a few rupees to plug their cell phones in for a half hour's worth of charge. The villagers' homes didn't have electricity.

Less than a year later Micromax sold its first cell phone, the X1i. It came with an oversized battery, a small screen, and tweaked electronics that made the phone run for as long as five days, and on standby for as many as 30 days. "It was really the most obvious thing to do," says Vikas Jain, who co-founded the company in 1991 with three friends. "Here was something that provided customers a feature nobody else had bothered to give them—battery life."

Micromax, based in Gurgaon, a city near New Delhi, has introduced 37 phones in just over a year and a half, designing them in India and manufacturing with partners in China. The company has kept its phones affordable—they start at $40—and tailored to local tastes. Few Micromax handsets bother with Wi-Fi, 3G, or GPS capabilities, for example. That keeps costs down in a country where there isn't much Internet access and very little 3G coverage. One phone doubles as a Nintendo Wii-like controller, allowing users to play games on a television game console. Another, marketed heavily with Bollywood-themed TV commercials, has costume jewelry embedded in it and swivels open to reveal a full keyboard. Micromax is selling about 1 million handsets each month, or about 4 percent of the $6.3 billion Indian market; Indian phone makers as a group have grabbed 14 percent of the market, according to research by Indian trade magazine Voice&Data. That gain has come largely at the expense of global giant Nokia (NOK), whose share in India fell from 64 percent in 2008 to 52 percent by the end of last year. Jain says he plans to sell 30 million phones a year by the end of 2011—including 6 million in Africa and Latin America.

Micromax's approach has attracted interest from Boston-based TA Associates, a $16 billion private equity fund that invested $45 million in the company in January for an undisclosed stake. "We did spend a lot of time with the broader universe of Indian phone makers," says Naveen Wadhera, a TA Associates Advisory director based in Mumbai who worked on the deal. "But what we specifically wanted was someone with a real focus on product and a real effort at innovating. The others have a bit of a me-too sort of strategy."

Nokia's India Vice-President and Managing Director D. Shivakumar is dismissive of the Indian phone-making competition. It doesn't take much, he says, to hop a flight to Shenzhen, China, and put your own sticker on a phone. "You know, Nokia's one of those companies that nobody pays attention to when it does well," he says in a conference room at Nokia's Gurgaon offices. "It's like when Roger Federer wins at Wimbledon, nobody talks about it. But lose once..."

One floor away, Nokia is hosting a group of Indian tech bloggers who were writing about the Finnish handset maker's latest touchscreen model with Carl Zeiss lenses. Elsewhere in the country anthropologists working for Nokia track the results of an experiment where the company gave every person in four neighboring villages a free phone with access to local weather, crop, and other information. Each Nokia phone spends nearly 18 months in development, says Shivakumar, with models tested for water exposure, bent by robots, and shaken around in boxes full of sharp objects.

That time-consuming attention to detail, and the fact that Nokia makes phones for sale across the world rather than tailored to Indian tastes, may help Micromax continue to steal customers, says Naveen Mishra, lead telecommunications analyst at research firm IDC India. Micromax takes no more than four months to go from idea to execution, says Jain. Its $75 Qwerty-keyboard phone is already India's best-selling full keyboard handset, according to IDC, beating Research In Motion's (RIMM) BlackBerry, whose cheapest unit goes for $320. Nokia plans to launch a similar phone, the C3, that will be cheaper than Micromax's, as part of a mid-range series of phones.

One of Micromax's greatest successes has been a feature that allows phones to handle multiple accounts. In India, mobile plans are mostly prepaid and, thanks to an ongoing price war, among the cheapest in the world and getting cheaper. Consumers constantly shop for deals and often wind up with three or more accounts—nearly 100 million Indians have multiple cell numbers, estimates investment bank Macquarie. To switch among numbers, cellphone owners used to have to swap SIM cards, the little plastic-and-metal identifier chips that slide into handsets. Micromax has designed almost all of its phones to hold two SIMs, and handsets that can have up to two numbers are part of its signature. One of its phones comes with a motion sensor so that all a user has to do to switch SIMs is briefly flip the phone upside down.

Nokia will introduce its own dual-SIM phone soon, promises Shivakumar, more than a year after Micromax debuted its first model. "And because it's a Nokia phone," he says, "it's going to be the best in the category."

Prakash Murarka, a 21-year-old college student, says he has four phone numbers and one handset. He holds up his SIMs as if they were a miniature deck of cards, and slips two into a Micromax handset. "The first one is to call my parents," he says. Then he spins his phone like a gunslinger, kicking in the second SIM. "And this one is to call my girlfriend."

The bottom line: Micromax is gaining market share in India by making cheap phones with long battery life and offering other features local consumers want.

Srivastava is a reporter-at-large for Bloomberg News in London. He also reports for Bloomberg Businessweek.

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