Managing Marketing Programs

Pricing Strategies- Mobile Phone Industry

By Parvez Rangwalla
Email-ID: pryprv@gmail.com

Welingkar Institute of Management Development

& Research, Bangalore.

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Topics Covered:

Topic Page No

1. History and growth of mobile phone industry in India 3

2. Current scenario of Mobile phone industry 4

3. Marketing strategies of Major players- Nokia and Samsung 7

4. Pricing Strategies in Mobile Phone Industry 12

5. Current trend in mobile industry 17

6. Future of mobile industry (RURAL) 20

7. References 22

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1. History and growth of mobile phone industry in India:
The real transformation came in the scenario of Indian telecom industry after
announcement of National telecom policy in 1994. The mobile services were
commercially launched in India in August 1995. In the initial 5–6 years the average
monthly subscribers additions were around 0.05 to 0.1 million only and the total
mobile subscribers base in December 2002 stood at 10.5 millions. However, after
the number of proactive initiatives taken by regulator and licensor, the monthly
mobile subscriber additions increased to around 2 million per month in the year
2003-04 and 2004-05. In the last few years there has been a huge exponential
growth with addition of about 10 to 15 million subscribers per month to customer
base.

In the initial days of mobile phone in India in mid 1990‟s the grey market accounted
for 80 per cent of the mobile phone sales due to a huge price differential between the
legally imported and the grey market phones.

Even as the government slashed the duties at the same time various mobile
manufacturers reduced their rates to induce the customers to buy a phone from
authorized phone shop. Today the grey market comprises very small share of
market.

When mobile phones were introduced in India in the mid-90s, US based Motorola,
Sweden's Ericsson and Finland's Nokia dominated the handset market in India. Over
the years, the old order has changed today players like Samsung, LG, Apple, Virgin,
HTC, Huawei, Haier are all competing for a place in the market. Apart from this there
is also a competition from imported unbranded Chinese mobiles which are avaible
with lot many features of a typically high end say Nokia mobile but, at a substantially
lesser price.

After the initial dominance of Nokia from 1990‟s till 2002, a change occurred in Indian
market hen CDMA technology was launched in the year 2003. At this point the
Korean brands namely Samsung and LG established themselves after they tied up
with CDMA operator Reliance Infocomm. This was a breakthrough in India‟s mobile
phone industry since, people were able to get mobile phones with Reliance
connection only for a initial cost of about Rs. 500/-. This opened up a mass market
for mobile manufacturers in India.

Gradually all the major players like Nokia, Motorola came up with their CDMA
models and have been able to regain their market share.

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In the last few years India has witnessed a revolution in mobile phone market with
about 8 to 10 million subscribers being added to the customer base each month. The
major reasons for this boom have been:

1. Falling tariff rates of telecom service providers .

2. Fall in the prices of mobile handsets.
3. Increase in the reach of service providers covering ever nook and corner of
the country.

2. Current scenario of Mobile phone industry:

Following are the highlights of mobile phone industry in India as on December, 2009:

1. The penetration of mobile phones stands at about 30%.

2. 81% of mobile users are in urban area.
3. India‟s rural teledensity stands at about 12.6%
4. India has about 517 million subscribers by December, 2009.
5. It is forecasted that sales of mobile handsets in rural India will grow at CAGR
of around 17% from 2009 to 2012

Above figures clearly indicate that although mobile phones might have made
significant inroads into the urban market & urban market may start moving towards
saturation but, still lot of potential is to be explored in the rural segment.

Market Share of different Manufacturers as on Dec-2009 is given below:

As evident from above figures, Nokia is a major player in the Indian mobile industry
today.

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Also to understand the satisfaction level which users of above brands express, we
look at a consumer satisfaction survey, the results of which are shown below. The
survey was done on Indian Urban mobile phone users with Sample size of N=5,775.
The source of this data is website: www.vitalanalytics.in

Users Likely to
Model
recommend
LG 57.6%
Motorola 41.0%
Nokia 68.6%
Samsung 55.7%
Sony-Ericsson 65.3%

The result shows Nokia users are the most satisfied with their product followed by
Sony-Ericsson and LG.

The results of above survey are important since, mobile phone is a device which is
frequently replaced in few years time, so, the brand which provides maximum
satisfaction to users will be able to maintain high loyalty and hence, maintain its
market share.

A segregation of Indian market on the basis of price bands is shown below. We can
see that mobile phones are avaible in various price bands from Rs. 2,000/- & less up
to Rs. 50,000/-

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Source: http://www.fonearena.com/mobile_phone_pricelist.html

A close study of the product offered by various companies reveals following:

1. Companies like HTC, Apple, Vertu have products only for the high end market
of Rs. 15,000/- and more.
2. On the other hand there are players like Usha lexus whose product fall in the
lower category with their products being avaible in price range of minimum of
Rs. 1,900/- to maximum Rs. 5,900/-. Also, Virgin mobile, Huawei etc fall in the
same category.
3. Players like Onida have mobiles in lower prices (Rs. 2,000/-) to middle price
range (till Rs.9,900/-).
4. Players like Motorola, Nokia, LG, Sony Ericsson have mobile phones avaible
in all different price range and hence, are able to target all the different
segments of the market.

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3. Marketing Strategy: A holistic view (Nokia, Samsung):

Nokia:
Nokia, as a manufacture of mobile communication devices, was succeeded in
administrating marketing strategies in India markets. The reason is that Nokia
delivers better products which cater to the needs and preferences of Indian
consumers.

Nokia - Made in India – A detailed analysis

In April 2005, Nokia India, a subsidiary of Finland-based Nokia, announced that

it was setting up a manufacturing facility for mobile devices in Chennai, the state
capital of Tamil Nadu in southern India. Nokia planned to invest US$ 100-150 million
in the facility, where the production was expected to begin in the first half of 2006.

Pekka Ala-Pietilä, President and Head of Customer & Market Operations, Nokia
Corporation said, “Establishing a new factory in India is an important step in the
continuous development of our global manufacturing network.”4 India was ideal for
Nokia's new production facility. Each mobile handset has more than 400 parts and
the average production capacity of each manufacturing unit of Nokia is around 20
million units.

This level of manufacturing involves a total of 8 billion components per annum,

requiring strong logistical support. Nokia's manufacturing facility needed to be
located close to a major international airport or sea port for quick supply of
components. India met all these requirements, and also enjoyed cheap manpower
costs and proximity to the rapidly growing Asia Pacific markets.

Besides, Nokia was the market leader in mobile communication devices in India.
The company has been carrying out sales & marketing, customer care and research
& development activities in the country. Nokia considers India to be one of its most
important markets. The company's Code Division Multiple Access (CDMA)5 facility is
located in Mumbai and provides software and technical support to CDMA consumers
in India and other Asia Pacific countries. In 2004, Nokia was chosen as „the most
respected consumer durables company' by Businessworld6. The magazine wrote,
“This Finnish company's debut at the top of the heap says two things.

One, that its strategies - including ones like developing a phone specifically for
India - are respected. But, more importantly, Nokia's win is also an endorsement of
the importance of the ubiquitous cell phone as a durable in today's world. After all,
unlike its competitors, most of which offer a slew of durables, Nokia is mostly a cell
phone company.”

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 In 2005, Nokia was recognized as the „Brand of the Year by the Confederation
of Indian Industry, India's apex industry association. The company was chosen for
this award because of its high brand recall, well established distribution channels
and being 'most preferred' by the consumers.

Enamoured of Nokia's success in the Indian market, Harvard University had

invited Nokia India to talk on „How Nokia cracked open the Indian market?'

About Nokia

Nokia was founded in 1865 by Fredrik Idestam in Finland as a paper

manufacturing company. In 1920, Finnish Rubber Works became a part of the
company, and later on in 1922, Finnish Cable Works joined them. All the three
companies were merged in 1967 to form the Nokia Group.

In the late 1970s, Nokia started taking an active interest in the power and
electronics businesses and by 1987, consumer electronics became Nokia's major
business. Nokia created the NMT mobile phone standard in 1981 and launched the
first NMT phone, Mobira Cityman, in 1987. The company delivered the first GSM
network to Radkilinia, a Finnish company in 1991, and in 1992, Nokia 1011 - a
precursor for all Nokia's current GSM phones - was introduced.

In the 1990s, Nokia provided GSM services to 90 operators across the world.
Another significant move of the company during this period was the divestment of its
non-core operations like IT. The company focused on two core businesses - mobile
phones and telecommunications networks. Between 1992 and 1996, the company
exited from the rubber and cable businesses as well...

Nokia entered the Indian market in 1994. The first ever GSM call in India was
made on a Nokia 2110 mobile phone on its own network in 1995. When Nokia
entered India, the telecom policies were not conducive to the growth of the mobile
phone industry.

The tariffs levied on importing mobile phones were as high as 27%, usage
charges were at Rs.16 per minute and, at these high rates, consumers did not take
to mobile phones. Nokia also had to face tough competition from other powerful
global players like Motorola, Sony, Siemens and Ericsson...

Nokia was quick to learn from its mistakes and adopted strategies to regain its
lost market share. Globally, during the first quarter of 2005, the company's sales
reached 7.4 billion euros, with the company selling 54 million phones during the
period. In India, Nokia continued its leadership in GSM with a market share of 74% in
March 2005. Nokia also surpassed Samsung in color mobiles in the GSM segment,
recording a share of 55% in the same month

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 Nokia reorganized itself at the global level in 2004. At this point, a multimedia
division was formed.

The division's Indian operations concentrated on promoting the concept of high-

end telephones in smaller towns while going in for higher volumes in larger cities.
The marketing division of the company concentrated on making distributors in small
towns sell high-end products. Though, the distributors were skeptical to start with, by
the end of 2004, the process was streamlined and the results started to show.

The Future Prospects

According to industry analysts, by 2010, the mobile phones industry in India will be
driven by voice, multimedia and mobile services for organizations. The teledensity in
India was estimated to increase to 18.2% by March 2009, with mobile subscription
rising to 148.77 million by that time. In many instances, the cell phone has become
the only basic telephone link of a household/enterprise in India, rather than a landline
phone. It was turning out to be more economical and efficient than fixed line
telephones. So, there was great scope for further expansion with reduction in the
cost of ownership

Samsung's Strategy to Gain Market Share in The Indian Mobile Phone Market

The Samsung management has initiated a market-mapping exercise to get into our
fold distributors who have relevant knowledge of the market, credibility, a good
distribution network and will therefore contribute in strengthening Samsung's reach in
the market, the new distribution strategy would take its penetration level in the
market from the current 55 percent to 85 percent by the end of the year.

On the retail front, it was taking initiatives to increase the number of retailers
enrolled as Samsung Mobile Privilege Partners (SMPPs) from around 100 in 2007 to
around 400 by the end of the year. Single and multi-brand retailers had shown an
interest in becoming SMPP.

In the same month, the company launched five new mobile phone models and said
that it would launch another 13 by the middle of the year. The models that were
launched included multimedia phones, phones for corporate customers, and a
comparatively lower priced model aimed at a bigger chunk of the market.

The company as of early 2008, its mobile phones were priced between Rs. 1,700
and Rs. 28,000, but that the company would launch more expensive mobile phones
in the future

The company also announced its new positioning with the new pay-off line 'Next is
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What?' and that it had roped in a leading actor of the Indian film industry Aamir Khan
(Aamir) as its brand ambassador. Aamir would also feature in its new ads.

Announcing the major celebrity endorsement for the brand, HB Lee, president and
CEO, Samsung (South-West Asia), said, "The Samsung brand stands for qualities of
innovation, change, discovery, self-expression, and excellence in performance. And
these very same qualities are epitomized by Aamir Khan, whose quality and depth of
work as well as versatility as an actor, have made him a much loved and respected
actor in India today. We are indeed very proud and privileged to have him as our
brand ambassador."

With Aamir's endorsement of Samsung, the fight for the mobile phone market had
also become a four-way battle with other leading actors endorsing the rival brands -
Shah Rukh Khan endorsing Nokia, Abhishek Bachchan endorsing Motorola, and,
Hrithik Roshan endorsing Sony Ericsson.

According to Samsung, the mobile phone market in India would be 100 million units
in 2008-09.With all these new initiatives, Samsung was confident of achieving its
objective of cornering a 15 percent market share in the country.

The company said that it had the necessary infrastructure to ramp up its production
capacity at its manufacturing unit at Noida from the current 6 million units per annum,
depending on the demand

Recently to have an impact on international prospective mobile phone users,

Samsung has signed up Didier Drogba, playing in Chelsea Football Club, as its
2008 Mobile Phone category brand ambassador.

As part of this partnership, Drogba will appear in Samsung Mobile adverting

campaigns for a period of one year, and will also make public appearances to
promote Samsung‟s products and corporate activities.

“Extending our association with Chelsea FC, we are now thrilled to partner with
Drogba as Samsung‟s brand ambassador,” says Chi Won Suh, CEO,
Samsung Middle East and Africa region. “Africa is a key market for Samsung
Electronics, with immense growth potential, and we are confident that our
association with an internationally and locally acclaimed football star like Drogba
will bring us closer to the football loving population throughout the African
continent.”

Football sponsorship is one of the pillars of Samsung‟s sports marketing strategy. It

is derived from the belief that sport especially football unites people of all ages,

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genders and races.

Samsung bada to rival Android, Linux

Samsung entered into the mobile OS arena with bada. The software, whose name is
based on the Korean for "ocean," is designed to be open and will compete directly
against rivals like Android or LiMo. It will be based on universal standards and won't
consider even core aspects of the OS off-limits: developers can not only use
contacts, the dialer and other utilities but extend them with new features of their own.

Most details are left vague, but bada will have a central app store. Carriers will also
have the option of customizing the OS to suit their own tastes.

Samsung expects the very first device using bada to show in the first half of 2010
along with the initial app store. More phones should be ready by the second half of
that year while the app store will expand to 30 different countries, including key
countries in Europe. A more formal unveiling is due in the UK for December and will
be followed by first looks for developers both in December and in January.

The news backs analyst claims of Samsung moving to its own platform and adopting
modern open platforms, including bada. If fully representative, it also signals the
likely ends of Symbian and Windows Mobile at Samsung, as the forecast would have
Symbian gone entirely by 2011 and Microsoft's OS at just 20 percent by 2012 where
it makes up 80 percent of Samsung phones today. Such a gesture will also render
closed platforms like OS X iPhones and Windows Mobile the relative minority in
numbers, though not necessarily market share.

Recent happenings were the Samsung Corby, which is a full-touch handset that
places users at the centre of the social media revolution with full support for a wide
range of social networks. The new mobile compliments the Company‟s existing
touch screen strategy “touch for every lifestyle” by broadening the market and
targeting the youth audience.

The Corby represents a complete makeover for the youth segment, with its eye-
catching design, which marks a significant break from the way full touch phones are
usually designed. The Samsung Corby is notable for both its body design and
colours; it comes with bold colour options

With Ghazini swiping the box office Samsung has enchased on its brand
ambassador Amir Khan by launching Ghazini mobile games on selected models
which is a smart and innovative approach of marketing strategy.

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The future prospects of Samsung mobiles doesn‟t seem gloomy with the above
developments and with time to come there would be a tough competition with its
rivals. So Next is what?

4. Pricing Strategies:

1. Penetration Pricing: This pricing strategy is followed by companies with the

intention to maximize their market share. They believe that a higher sales volume
will lead to lower unit costs & higher long-run profit.

Example: China Mobile Phones in India.

This is one of the fastest growing industries in India. China mobile phones are cheap
and offer the same features as a expensive mobile from some other well known
manufacturers.

Rs:
Rs: Rs: 9800 Rs:
Rs:
12000 9900 9400

9500
China_Elitek_85 China-GT-MD900
China-JN269 China-MT3300 China-6500S
02
Rs: Rs: Rs: Rs:
Rs:
8700 6137 5200 4500

4900

China_GT_Q71 China-Elitek- China_Elitek_X6 China_ELITEK_X6 China_Elitek_X6

8 X6019 011 010 012

A few samples of Chinese mobiles are shown above. Only problem that exist for the
Chinese mobile phones is that consumer generally have a low quality perception
associated with them and hence, do not trust their quality. However, they are well
suited to people who want to enjoy features of a high end mobile without having a
budget for the same.

2. Predatory Pricing
This pricing strategy is followed with the intention to wipe out the competition.
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 Example: In the year 2003, LG and Samsung along with Reliance came up with
Rs. 500/- mobile scheme where both handsets along with connections were
available for Rs. 500/-. This was something which revolutionized the mobile
phone and telecom industry.

3. Perceived value Pricing:

In this case the pricing is done based on the customer‟s perception about the
company and its product. Perceived value is made up of several elements such
as buyer‟s image of product performance, the channel deliverables, warranty,
quality and even softer attributes such as supplier‟s reputation.

Example: A good example for this kind of pricing is Apple iPhones. They are offered
in price range of Rs. 31,000/- to Rs. 42,500/-.

Their price is set based on image of brand apple & customer affinity towards it.
Comparable mobiles phones from other manufacturers like Sony Ericson, Nokia are
offered at relatively cheaper price. For example comparable N series mobiles from
Nokia are offered at prices below Rs. 30,000/- (Except for Nokia- N9 & Nokia-8800
Carbon). Also, SONYERICSSON – Satio is offered for Rs. 31,000/- & all other Sony
brands are available for prices below it.

Apple can set higher prices since; it feels that its customers will be ready to pay for it
based on its perceived value.

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Apple-iPhone-3G-S-32GB Price | Rate Rs: 42,500/-

4. Value Pricing: This is pricing strategy in which a company wins loyal customers
by charging a fairly low price for a high quality offering.

Example: Nokia E 63 Mobile.

This mobile is priced at Rs. 11,260/-. This mobile offers a large number of high end
applications like: Web-Browsing, Email, Data Network, GPRS, GPS & Navigation
and lots of other facilities apart from serving the basic mobile functions. At the same
time it has a sleek body & robust structure.

A image of this mobile has been shown below.

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5. Product form pricing: Different versions of the same product are priced
differently.

Examples: Nokia-5000 is priced at Rs. 4,300/- Whereas, Nokia-7210C-Supernova is

priced at Rs. 4,800/- offers almost the same features. The reason for difference in
pricing is due to the sleek structure of Nokia-7210C.

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6. Promotional Pricing:

1. Special Event Pricing: In this case special prices are offered during special
occasions like festivals to increase the sales.
Example: Last Diwali (September, 2009) Samsung offered discounts on
Samsung Omnia mobile phone. Their market price at that time was Rs.
33,990/- whereas their discounted price for Diwali was Rs. Rs. 31,990/-.

2. Low-Interest financing:
Company can offer low interest financing to customer. This will reduce the
burden of initial cost to the customer.

Example: In 2009, Nokia piloted a scheme in two Indian states where it sold
handsets on a weekly instalment of 100 rupees ($2) over 25 weeks period.

3. Psychological Discounting:

This is done to make the customer believe that product is priced cheaply or
some cases just break the price barrier that customer has in his mind like
price at price Rs. 999/- which is priced just below Rs. 1,000/-.

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 Example:
MOTOYUVA - W156 prices at Rs. 1,099/-
Samsung Guru- Rs. 2,999/-

5. Current Trend in Mobile Industry:

-- With saturation in the urban market, growth in Indian mobile market will be driven
by an increased focus on the rural market, aggressive promotions, and handset
bundle offers.

-- As of March 2007, mobile subscribers in rural India accounted just 20% of the
Indian mobile subscriber base. However, it is forecasted to grow at a CAGR of more
than 47% during 2007 to 2010.

-- In order to remain competitive, the mobile industry could see several mergers and
acquisitions, roll out obligation and substantiate equity holding in more than one
telecom company.

-- The major growth in mobile phone subscribers will be seen in C' Circle and B'
Circle in short-term.

-- Enormous opportunities are emerging for the low cost handset manufacturers
along with low tariffs, infrastructure development for mobile communication.

-- Rural India will account for around 35-38% of the total mobile handset sales by
2010.
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The industry's spectacular growth in India is attracting the attention of several
international brands. Glenn Smith reports
SECTOR INSIGHT

The growth of India's mobile sector has not gone unnoticed. Last year, Virgin Mobile
agreed a deal to enter the market, and Japan's DoCoMo bought into mobile operator
Tata to stake its claim in the fast-expanding industry.

India offers astounding growth statistics. In October 2008, according to the Telecom
Regulatory Authority of India (Trai), 10.4 million Indians signed up for a phone
service, pushing the national total to 363.9 million, a penetration of 31.5 per cent.
Only 10 years earlier, India had a mere 880,000 phones, most of them landlines,for
one billion people. Today, fixed-line phones account for only 10.5 per cent - 38.2
million subscribers and this absolute number is slowly declining. Wireless operators,
meanwhile, are surging ahead. Many first-time phone buyers are opting for mobile,
and will drive the total subscriber base to 500 million by 2010,according toTrai.

The expansion has been fuelled by recent economic prosperity, but the accelerant is
an ever-increasing affordability of handsets and services. Mobile phone service costs
have plummeted. In March 1999, the effective charge was more than 15.32 rupees
(US$0.31) per minute, which fell by half in 2000, again in 2001 and repeatedly
dropped until today - at less than a rupee, it is believed to be the cheapest rate in the
world.The sector's expansion is not expected to be hit by the economic slowdown.

"Market growth is moving away from the cities and going into the villages and rural
areas," says Shankari Panchapakesan, executive director of mobile services, The
Nielsen Company, South Asia. "The macroeconomy won't impact this, because rural
people are using phones in ways that make a difference in their life, how they work,
how they educate their children, and how they access information."

Fishermen, for example, use phones to find outlets for their catch. Women earn a
living with phone exchanges. Carpenters carve their numbers on village walls. For
handsets, the undisputed leader is Nokia. The Finnish telephone giant has been in
India since 1994, and has invested in three R&D labs, making facilities and
distribution partnerships.

Naresh Priyadarshi,head of Synovate Business Consulting, says Nokia has 90,000

distributors in India, giving it a 90 per cent retail footprint. There are also 30,000plus
stores that sell Nokia exclusively. Nokia has concept stores in at least seven major
cities.

Together, India's retail outlets sold 132 million handsets worth 700 billion rupees in
2008, according to Synovate. Nokia's share of value was 59 per cent, followed by

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Sony Ericsson with a distant eight per cent, Samsung with seven per cent and
Motorola with six per cent. Smartphones account for 24 percent of sales, according
to Synovate, with mid-priced feature phones taking 28 per cent, and the remainder -
48 per cent - being ultra-low-cost phones. Handset makers see ultra-low-cost
phones as the road ahead despite the razorthin profit margins. Already, sales of
cheap handsets are depressing average prices. Euromonitor estimates that unit
prices fell 50 per cent between 2004 and 2007 to an average of 2,808 rupees.

To put handsets within reach of India's rural poor, phone makers have had to rethink
product design. The Nokia 1100 included a torch, alarm clock and a radio. Nokia's
entry-level phones are now priced at 1,500 rupees. Spice Mobile halved that with its
People's Phone, priced at 599 rupees, including lifetime prepaid activation.

To bond with rural users, Nokia is launching a subscription-based service called 'Life
tools' with information on agriculture and education. Such phone services will serve
as the first online experience for rural Indians.

Among affluent urban users, value-added-services (VAS) for feature phones are
seen as the way forward. Synovate reports VAS at 50 million rupees in 2008, and
fore- casts 70 per cent annual growth to push that to 165 million rupees by 2010. It is
this fast-growing, rapidly diversifying market that is attractive to overseas firms,
though they should not expect much profit in the short term

Some important facts about Rural Coverage:-

• About 70 percent of India's near 1.2 billion inhabitants live in rural

communities
• rural teledensity was a mere 12.6 percent
• Rural wire line connections totaled 10.68 million at the end of December,
down by 2.46 percent from 10.95 million at the end of Septemberr 2009
• The rural wireless subscriber base hit 93.15 million at the end of the year, up
2.38 percent from 90.98 million at the end of September
• Department of Telecom and BSNL have signed an agreement to provide
861,000 connections to individual users and government institutions through
rural and remote exchanges by 2014
• To promote rural rollout by the private operators, the Indian government
imposed Universal Service Obligations (USO) on the country's operators to
build a fund that can finance the rollout of services in areas where there isn't
an obvious or pressing business case to do so
• The first phase of mobile infrastructure deployment under the USO fund
scheme commissioned six different service providers to deploy 7,871 towers
• However, by the end of October 2009, only 1,934 towers had been installed

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 • The second phase, complete with a tender for an additional 11,049 sites, has
yet to be started
• The phased rollouts associated with the USO scheme require an additional
40,875 mobile towers to be erected
• Add this to the number of towers required for the five new 2G networks,
additional coverage and capacity for existing operators, and the introduction
of 3G networks, and there is a huge demand for new cell sites right across the
country

6. Future of Mobile Industry:

Demand Among Poor Farmers Keeps an Industry Growing as Other Sectors of the
Economy Are Jolted. Rural customers "have been hungry for mobile phones for a
long time, so demand will remain unaffected," by the global jitters, said S.P. Shukla,
chief executive officer of the mobile business at Reliance Communications India Ltd.,
India's second-largest cellular company by number of subscribers,

Even amid the global economic slowdown, one Indian industry continues to boom:
selling cellphones to the rural poor.

Economists have slashed Indian economic growth forecasts for this year and the
stock market is in the doldrums. But cellphone companies are signing millions of new
subscribers a month, making India the fastest growing mobile-phone market in the
world. There is no sign of a slowdown yet: figures to be released later this month are
expected to show that new subscriptions in January reached a record 11 million.

The demand for cellphones is coming mainly from rural consumers, who typically
earn less than $1,000 a year. These buyers haven't been affected by plunging stock
and real-estate prices or tighter bank lending since they typically don't own land and
don't borrow. A large majority of them don't have access to regular landline phone
networks -- there are only about 40 million landline subscribers in India -- so once
cellular coverage comes to their towns or villages they scramble to get their first
phones.

In the village of Karanehalli, a cluster of simple homes around an intersection of two

dirt roads about 40 miles from India's high-tech capital of Bangalore, Farmer K.T.
Srinivasa doesn't have a toilet for his home or a tractor for his field. But when a red
and white cellular tower sprouted in his village, he splurged on a cellphone.

While the way his family threshes rice -- crushing it with a massive stone roller --
hasn't changed for generations, his phone has changed the way he farms. He uses it
to decide when to plant and harvest by calling other farmers, to get the best prices
20
for his rice, coconuts and jasmine by calling wholesalers, and to save hours of time
waiting on the road for deliveries and pickups that rarely come on time.

"Life is much better with the cellphone," he said from his rice paddy in the shadow of
the new tower. "I bring it with me to the fields and anyone can reach me here."

Mr. Srinivasa, like close to half the 800 people in his village, uses Idea Cellular Ltd.
as it was the first to bring them service. He paid the equivalent of about $60 for his
Nokia phone, and spends about $6 each month for service. Like most rural users,
Mr. Srinivasa uses his phone to make voice calls -- he doesn't know how to text
message or to download emails. On average rural Indians use their phones around
8.5 hours a month, up 10% over the past year.

The story is the same across rural India, home to more than 60% of India's
population of 1.2 billion. China, Indonesia and Brazil also continue to show solid
growth in cellphone sales.

The continued expansion of the cellphone industry in India stands in sharp contrast
to most other industries here. Textile and software exporters are struggling. India's
brand new malls are sparsely populated and the sales of cars, trucks, tractors and
motorcycles have declined in recent months.

But the cellphone industry recorded more than 10 million new subscribers in
December, up from eight million a year earlier. The industry's overall subscriber base
grew 48% in 2008 to 347 million customers.

Rural customers "have been hungry for mobile phones for a long time, so demand
will remain unaffected,"

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 7. References:

http://en.wikipedia.org/wiki/Communications_in_India

http://www.icmrindia.org/casestudies/catalogue/Business%20Strategy/BSTR174.htm

www.vitalanalytics.in

http://www.fonearena.com/mobile_phone_pricelist.html

www.mobile-prices-india.com

http://www.mobile-prices-india.com/Nokia_Mobile_Phones.php

http://web.ebscohost.com

http://www.india-cellular.com/Mobile-Prices.htm

http://proquest.umi.com/pqdweb?index=8&did=1635821441&SrchMode=1&sid=3&F
mt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1264756239&clien
tId=135690

22