Handset Competition Remains Heated in India with Reliance Launching Low-Cost CDMA Colour Phones

Reliance Communications, India's second-largest mobile operator, yesterday launched three colour CDMA handsets priced between 1,222 rupees (US$30) and 1,299 rupees, the Hindu reports. The move follows Reliance's recent launch of three feature-rich "Classic" CDMA handsets priced between 777 rupees and 888 rupees. "We will be focusing on subscribers who want to switch over to colour phones besides targeting new subscribers. The Classic range of handsets comes with SIM cards, which allows subscribers to change over from one model to another. However, the subscribers cannot shift to another CDMA operator," Reliance Communications President (Personal Business) S. P. Shukla said at a press conference yesterday. Shukla said the new handsets are being manufactured by a couple of companies exclusively for Reliance Communications. He added Reliance Communications is also planning to introduce high-end BlackBerry phones that offer wireless e-mail solutions. Currently, BlackBerry phones are only available with two GSM operators—Bharti and Hutchison Essar—and Reliance Communications would be the first to introduce the phones on its CDMA-based mobile network.

Outlook and Implications

The launch is another attempt by Reliance to attract new and existing mobile subscribers towards the CDMA platform. A large majority of its customers are on the CDMA platform. The new colour handsets will complement the Classic range of CDMA handsets launched by the operator earlier in May. Priced between 777 rupees and 888 rupees, the Classic range offers the cheapest handsets available in India (see India: 3 May 2007: Reliance Communications Launches Low-Price Mobile Handsets). Although most mobile operators and handset makers are increasingly focused on the provision of low-cost handsets to tap into the small cities and rural areas in India, so far no other companies have launched a model in the sub-US$20 or sub-1,000-rupee range. Operators like Reliance can afford to sell handsets at lower rates by tagging a connection along with the equipment. Handset makers like Nokia, LG and Samsung have, however, said they do not plan to venture into this region of sub-US$20 phones as this would hurt their margins.

Nevertheless, competition in the entry-level handset segment in India is set to intensify further, given the fact that a large portion of customer additions in the future are likely to be low-income customers. Arun Sarin, the chief executive officer (CEO) of British mobile giant Vodafone, which has acquired a controlling stake in Hutch-Essar, has recently told the Indian media that his company will go "all out to tackle the rural market with ultra-low cost handsets and bundled services". Vodafone has a tie-up with the Chinese manufacturer, ZTE, for entry-level handsets. Mobile operator Spice, which also manufactures handsets, also plans to launch handsets priced below 1,000 rupees, while U.S.-based handset vendor Motorola offers entry-level products priced at 1,200 rupees upwards. Finnish giant Nokia, which accounts for roughly two-thirds of the five-to-six-million monthly GSM handset sales in India, is also stepping up its efforts in the low-end handset segment to maintain its leadership in the Indian market. The world's largest handset maker earlier in April announced the launch of seven mobile phones priced between 2,000 rupees to 5,000 rupees, which will be available for the Indian customers in the second and third quarter (see World: 3 May 2007: Nokia Launches Seven Entry-Level Handsets For Emerging Markets). The launch includes two models that are intended for shared use by families or entire villages. Several of the new models also embed features like a digital camera, Bluetooth and GPRS connectivity, demonstrating the vendor's desire to make its basic handsets not only affordable but also attractive to the entry-level market. However, the Nokia 2505, the only CDMA handset featured in the launch, is priced at about 4,750 rupees, significantly higher than those offered by the CDMA operators.