Global Economics

Mobile Elite Rush to Answer India's Call


Subcontinent cell-phone hookups doubled in 2006 and should rise 48% in '07, surging past China's growth. Handset makers vie for their piece

Big global international handset makers Nokia (NOK), Motorola (MOT), and Sony Ericsson, along with Korean players LG Electronics and Samsung Electronics (SSNGY), are in hot pursuit of mobile-phone growth in India, and it turns out with good reason. The emerging economy's white-hot mobile-phone market grew faster than China's for the first time last year—and is on pace to become more than three times as fast in 2007, according to a new study by London-based research firm Wireless Intelligence.

This is a startling development given that India was pretty much a telecom backwater at the start of the decade. Last year, the number of mobile connections in India more than doubled to 142.2 million, and that figure is expected to increase 48% to roughly 211 million by the end of 2007.

China is still the world's biggest mobile-phone market with an estimated 443 million subscribers, according to Wireless Intelligence. However, the mainland's market grew by only 18% last year and that pace will slow further in 2007, to about 14%—still robust compared to developed markets such as the U.S., Western Europe, and Japan.

Where the Growth Is

Last year was definitely a tipping point for Indian mobile telephony, which had been growing by about 5.1 million new net subscribers on a quarterly basis in the middle of 2005. By the last quarter of 2006, wireless operators were pulling in about 17.1 million over a three-month stretch.

In terms of the expected 409 million additional global subscribers that Wireless Intelligence is forecasting for 2007, Asia is expected to represent 40% of that growth. Indeed, India, China, Pakistan, Indonesia, and Bangladesh are among the top 10 markets expected to register the fastest growth this year.

In many developed markets, such as Italy, market penetration is more than 100% thanks to multiple-device ownership, according to Wireless Intelligence, which is co-owned by European telecoms, IT consultant Ovum and the GSM Assn., a global mobile-phone trade association.

Meeting Market Needs

That's why global handset makers are shifting product-development efforts and marketing strategies to emerging markets. For instance, Motorola last November launched the Motofone in India after spending two years researching life in rural Indian villages to gain better insight on the phones it ought to design.

The Motofone handset has bold characters and a screen that remains visible even in the bright light of day. For those who can't read, the company developed a menu that is based on easy-to-understand icons, rather than characters, and handset software that is loaded with regional-language voice prompts.

Market leader Nokia, which has invested heavily in emerging markets, late last year slashed the price of its basic monochrome model —the Nokia 1110—from $50 to $43. And it now has three phones in the sub-$50 range (see BusinessWeek.com, 1/8/07, "India's Huge Market for Cheap Phones").

While the growth outlook is spectacular in India, it's a very tough market from which to extract profitable growth. Most of the truly robust growth is in rural India, home to 75% of the country's 1 billion-plus population. And handset manufacturers are faced with the tough task of delivering functional but low-priced handsets (in the under-$50 range) designed to meet the needs of low-income users (see BusinessWeek.com, 7/24/06, "Going Mobile in Rural India").

Bremner is Asia Regional Editor for BusinessWeek in Hong Kong.

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