Cellular service providers in the country are expecting the prices of handsets to fall below the $100-mark (Rs 3,900) this financial year. A sub-$100 cellphone price will translate into some Rs 6,000 inclusive of import duty and taxes.
The breaching of the $100-mark will perhaps be the first time in the world, sources said. Although in developed markets, cellular phones sell for as less as a dollar, or even free when bundled with airtime, the cost of acquisition of the handset remains high, a cellular industry source said.
The Indian cellular industry had set a record of sorts in November last year when it came together under the Cellular Operators Association of India (COAI) to buy handsets from Nokia at as less as $115. The Finnish telecom vendor sold the Nokia 1810 model which was being phased out from global markets then.
Cellphone prices have been dropping in the Indian market steadily over the last year-and-a-half. There are two main reasons for this: one, vendors reduce the price of the handsets along the life of the product. Typically, product life in the cellphone industry is about 18 months. For instance, Siemens S4 which was retailing at some Rs 40,000 early in 1996 was being hawked at as less as Rs 13,000 in mid-1997.
Next, as in any other industry, cellphone manufacturers too offer better prices on larger volume orders. The COAI order is an example. In the deal Nokia sold handsets at $115 only because the order was for nearly 35,000 handsets the single largest deal in the country.
The Indian market being as price-sensitive as it is ($115-150 handsets are estimated to make up for 80 per cent of the market), most cellphone vendors have been forced to lower their prices or introduce lower-priced ones. Subsequent to the COAI-Nokia deal, other vendors like Alcatel and Philips have also dropped prices to around $110-115.
Although the handset vendors bemoan the low realisations on their wares, they are being forced by cellular service operators to offload low-priced handsets in the market. The operators are worried that the market is not growing according to their initial projections and competing among themselves to offer customers the best-priced deal.
Operators are at the stage at which they just want to acquire customers as per their projections. And in doing so are willing to give as many sops as possible, a senior executive with a cellphone MNC said. Initial projections of a five-million subscriber base in the country by the turn of the century have been scaled down to 2.5-3 million.
Nokia leads the Indian cellular phone market with a marketshare of some 32 per cent followed by Motorola at below 30 per cent. Ericsson and Siemens make up another 30-32 per cent of the market, with brands like Alcatel, Philips and Sony among others making up for the rest.
