GSM players choose to stay out of handset price war

New Delhi, June 19: In the wake of Vodafone's foray into India with its proposed low-cost handsets, the country's leading cellphone makers are busy churning out feature-rich coloured phones to counter the British telecom giant's ambitious plans and establish a base in the rural hinterland.

CDMA (Code Division Multiple Access) players like Reliance Communications (RComm) and Tata Teleservices are looking towards the almost untapped rural market with their range of entry-level handsets at never before prices.

''Vodafone wants to be the number one player in India with its biggest expansion in rural India. The current price war is natural post our announcement of very low-end handsets,''a Vodafone spokesperson told UNI.

Vodafone has announced a two-billion-dollar investment in India in the first year of its operations to make Hutch the number one telecom operator in the country by 2010.

''Growth has to come from rural India with CDMA players having a major edge over the GSM companies in achieving the 500 million subscriber target for 2010,'' CDMA Development Group (CDG) India Country Head B V Raman said.

''This price war is expected to benefit the rural and semi-urban mobile connectivity in the country. This is the best way to enter the entry-level market for both the GSM and CDMA companies,'' he added.

He, however, disagreed that all this had anything to do with Vodafone entering the Indian telecom market. ''This cannot be said as RComm introduced handsets at a price point of Rs 501 in 2003, when Vodafone was nowhere in the picture.'' GSM (Global System for Mobile Communication) leaders like LG and Samsung agree with the market trend, but feel differently about the pricing strategy.

''These low-cost handsets will definitely have a positive effect on the overall mobile market but lowering the prices is not the only way to increase penetration in rural India,'' Mr H S Bhatia, LG Eletronics (India) National Product Group Head, GSM Mobile Phones told UNI in an interview.

''In a scenario where owning a mobile phone has become so affordable, a consumer does not mind shelling out some extra money for it whether he belongs to the rural or urban market.

We are not in the 'rat race' to bring low-cost handsets unlike some others,'' he said.

With a slew of schemes like lifetime validity by telecom operators and monthly prices coming down, affordability has definitely increased in the last two years, Mr Bhatia opined.

''Vodafone's entry in the Indian market is one of the reasons for these rock-bottom prices, as it was beyond the imagination of a common man to get a coloured phone at less than Rs 2,000 as offered by some,'' a Samsung Telecommunications spokesperson said while speaking to UNI.

About 80 per cent of the rural market is still virgin and this approach will expand the consumer base in Tier II and Tier III cities, increasing accessibilty for first time users, he said. Samsung, which has chosen to remain out of this ''price war'', will focus on its mid-level and high-end range, and has planned 10 new models in the smartphone category by the end of this year.

Mr Asim Warsi, GSM Head (Marketing), Samsung said, ''We are not getting into the ultra low segment. CDMA no doubt has brought down the overall prices of the mobile category with handsets available in the sub Rs 1,000 range. But we will continue our focus in the premium segment.'' According to Nokia Vice President and Managing Director (Mobile Phones) D Shivakumar, ''It is a myth that price is the only deciding factor for choosing a mobile handset for an Indian consumer.'' A customer goes for good looks, features, user-friendly handset and not prices, he added.

Talking to UNI, Tata Teleservices Ltd COO (Delhi Circle) Debashis Sur said, ''We are targeting the whole population, not only rural India. Our low-cost handsets will help penetrate the potential rural as well as the urban areas.'' Asked whether Indian telcos were making a platform to counter Vodafone's arrival with these low-cost handsets, he said, ''It's the market demand and we are fulfulling it, it has nothing to do with making a prior platform to counter Vodafone's entry to India.'' The company aims to strengthen its customer base with world class service, strong network and value-added services, he added.

Tata Teleservices Manager (Marketing) Asheesh Mehrotra said, ''We are providing branded handsets such as Huawei, Haier and Kyocera Topaz, whereas our competitors are introducing cellphones manufactured in China at cheap prices.'' RComm, which has started this low-cost phenomenon with its Rs 777 monochrome phones under the Classic range, has introduced coloured handsets with FM radio from Rs 1,888 onwards while Tata Indicom is offering coloured handsets at Rs 1,499 and above.

RComm President (Personal Business) S P Shukla said, ''We aim to encourage first time cellular customers to go for a new handset.

RComm wants to be in every segment to cater to every new emerging market.'' Mr T V Ramachandran, Director General, Cellular Operators Association of India, maintains that ''India is primarily a GSM market with an 80 per cent share. Acquiring a GSM customer is far better than a CDMA as the subscriber is not locked in with a lower-quality handset''.

Meanwhile, the government has extended its support to telecom companies who plan to introduce ''affordable'' Rs 1,000 and low-priced CDMA handsets aimed at increasing teledensity in rural areas.

The target for CDMA base is 75 million subscribers by the end of fiscal 2007-08, according to the CDMA Development Group.

With these moves, it appears very much in sight, he added.

UNI