Cell Phone Nation

Tirlok Singh is my chauffeur for the entire trip. An ever smiling man, he calls me every morning at 7.30 am to remind me that he is going to pick me up in forty five minutes. He calls me on his Nokia. He waits outside as I conduct my appointments, and once I am done, a simple call and he is outside, smiling with the door open. His colleagues in the car rental service are all equipped with cell phones. In India, there is no getting away from the cell phone.

Every 200 yards is someone selling prepaid cell phones, or data plans. The tantalizing ads of cellular service providers with exotic names as Dolphin, Hutch, Essar and Airtel are on televison, on radio and on billboards. It is an amazing market place. Paan Walaas, those street hawkers who sell cigarettes by the singles and betel nuts, also sell SIM cards. ShahRuk Khan, an Indian Brad Pitt, touts a family plan, while Samsung is pushing its E700 as the camera phone of choice. (In US they call it E715.)

They don’t launch acts on MTV in India. Enrique Iglesias’ latest album is being marketed exclusively via mobile phone service providers. Download clips, watch a video and hopefully you buy an album. Amazing.

Indians buy no name computers but want a Sony Ericsson Z600 (Sale price about $225 unlocked in local currency!) Screw the computer, they would spend a whopping 45,000 rupees on a P900. The brand name matters when it comes to cell phones. Cell phones ring in middle of meals, and Indians strangely pick up the calls even when in a meeting with visiting NRI. The most amazing sight of the day was when a man tried to navigate his creaky old bicycle in rush hour traffic with one hand. The other hand was holding a cell phone glued to his ear, as he had an animated conversation. (Watch out car drivers, because in India it is the one with a bigger vehicle who is always guilty in case of an accident.)

It is a strange obsession India has with cell phones. Which is why it is the most exciting cell phone market on the planet. More exciting than China, because it is young and growing. More exciting that Europe and US where penetration rates are reaching maturity levels. Indians and Chinese will become king makers over next ten years in the mobile business. Samsung, LG, BenQ and other such lesser brands will become world leaders because they understand the dynamic of the Asian Markets.

Mark my words, it is end game for Nokia. Its days of making unprecedented profits are coming to an end. This morning the company announced reduction in its first quarter sales guidance, and a pressure on its EPS. The company sees Q1 2004 sales down 2% year over year due to sales of cheaper handsets. Nokia said “lower than expected volumes and the product mix negatively impacted Mobile Phones’sales and operating profit.”

If ASP’s are under pressure, this may be an industry problem. If ASP’s are not under pressure, it is just a NOK problem. We believe it is the latter. We also believe they are cutting the ASP to keep the 40% market share target in sight. Additionally, the lower volume is based on their product mix. However, we still see industry underpinnings that seem to show evidence of strong industry growth in handset volume. (Greg Gorbatenko Marquis Investment)

The news is particularly start when put in context of this morning’s headline in The Times of India.

In last three months India added 12 million odd new users, bringing the total for fiscal 2004 to over 33.2 million mobile phone subscribers, more than 150 per cent growth, thanks mainly to increased competition and steep fall in tariffs during the past 12-15 months, says The Times of India.

Of the total mobile subscriber base, GSM cellular industry – led by Bharti, BSNL and Hutch – showed impressive growth of 106 per cent. There were 26.1 million GSM subscribers at the end of March 2004, up from 13.4 million last March.CDMA was 7.1 million at the end of March, 2004 with Reliance accounting for over 6.4 million subscribers, followed by Tata Teleservices (Indicom), way behind at 620,000 customers.

So far the youth and upper middle class has led the growth and bought into mobile lifestyle. But the ever cheaper pricing plans are coming to make mobile a commodity like shampoos and soap. Can you hear me now, no you don’t because soon there will be a billion Indians talking.