As BlackBerry launches the first smartphone from its make-or-break BB10
line in India, one of its most loyal markets, the company faces new
competition from a formidable rival that has long had a minimal presence
in the country.
More than four years after it started selling iPhones
in India, Apple Inc is now aggressively pushing the iconic device
through instalment payment plans that make it more affordable, a new
distribution model and heavy marketing blitz.
"Now your dream
phone" at 5,056 rupees, read a recent full front-page ad for an iPhone 5
in the Times of India, referring to the initial payment on a phone
priced at $840, or almost two months' wages for an entry-level software
engineer.
The new-found interest in India suggests a subtle
strategy shift for Apple, which has moved tentatively in emerging
markets and has allowed rivals such as Samsung and Blackberry to
dominate with more affordable smartphones. With the exception of China,
all of its Apple stores are in advanced economies.
Apple expanded
its India sales effort in the latter half of 2012 by adding two
distributors. Previously it sold iPhones only through a few carriers and
stores it calls premium resellers.
The result: iPhone shipments
to India between October and December nearly tripled to 250,000 units
from 90,000 in the previous quarter, according to an estimate by Jessica
Kwee, a Singapore-based analyst at consultancy Canalys.
At The
MobileStore, an Indian chain owned by the Essar conglomerate, which says
it sells 15 percent of iPhones in the country, iPhone sales tripled
between December and January, thanks to a monthly payment scheme
launched last month.
"Most people in India can't afford a
dollar-priced phone when the salaries in India are rupee salaries. But
the desire is the same," said Himanshu Chakrawarti, its chief executive.
Apple,
the distributors, retailers and banks share the advertising and
interest cost of the marketing push, according to Chakrawarti. Carriers
like Bharti Airtel Ltd, which also sell the iPhone 5, run separate ads.
India
is the world's No. 2 cellphone market by users, but most Indians can't
afford fancy handsets. Smartphones account for just a tenth of total
phone sales. In India, 95 percent of cellphone users have prepaid
accounts without a fixed contract. Unlike in the United States, carriers
do not subsidise handsets.
Within the smartphone segment, Apple's
Indian market share last quarter was just 5 percent, according to
Canalys, meaning its overall penetration is tiny.
Still, industry
research firm IDC expects the Indian smartphone market to grow more than
five times from about 19 million units last year to 108 million in
2016, which presents a big opportunity.
Samsung Electronics
dominates Indian smartphone sales with a 40 percent share, thanks to its
wide portfolio of Android devices priced as low as $110. The market has
also been flooded by cheaper Android phones from local brands such as
Micromax and Lava.
Most smartphones sold in India are much cheaper than the iPhone, said Gartner analyst Anshul Gupta.
"Where the masses are - there, Apple still has a gap."
'I love India, but..'
Apple
helped create the smartphone industry with the iPhone in 2007. But last
year Apple lost its lead globally to Samsung whose smartphones, which
run Google's free Android software, are especially attractive in Asia.
Many
in Silicon Valley and Wall Street believe the surest way to penetrate
lower-income Asian markets would be with a cheaper iPhone, as has been
widely reported but never confirmed. The risk is that a cheap iPhone
would cannibalise demand for the premium version and eat into Apple's
peerless margins.
The new monthly payment plan in India goes a long way to expanding the potential market, said Chakrawarti.
"The
Apple campaign is not meant for really the regular top-end customer, it
is meant to upgrade the 10,000-12,000 handset guy to 45,000 rupees," he
said.
Apple's main focus for expansion in Asia has been Greater
China, including Taiwan and Hong Kong, where revenue grew 60 percent
last quarter to $7.3 billion.
Asked last year why Apple had not
been as successful in India, Chief Executive Tim Cook said its business
in India was growing but the group remained more focused on other
markets.
"I love India, but I believe that Apple has some higher
potential in the intermediate term in some other countries," Cook said.
"The multi-layer distribution there really adds to the cost of getting
products to market," he said at the time.
Apple, which has partly addressed that by adding distributors, did not respond to an email seeking comment.
Ingram
Micro Inc, one of its new distributors, also declined comment.
Executives at Redington (India) Ltd, the other distributor, could not
immediately be reached.
BlackBerry, which has seen its global
market share shrivel to 3.4 percent from 20 percent over the past three
years, is making what is seen as a last-ditch effort to save itself with
the BB10 series.
The high-end BlackBerry Z10 to be launched in
India on Monday is expected to be priced not far from the 45,500 rupees
price tag for an iPhone 5 with 16 gigabytes of memory. Samsung's Galaxy
S3 and Galaxy Note 2, Nokia's Lumia 920 and two HTC Corp models are the
main iPhone rivals.
Until last year, Blackberry was the No. 3
smartphone brand in India with market share of more than 10 percent,
thanks to a push into the consumer segment with lower-priced phones.
Last quarter its share fell to about 5 percent, putting it in fifth
place, according to Canalys. Apple was sixth.
© Thomson Reuters 2013