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Last Updated: Monday, 12 February 2007, 21:31 GMT
India seeks mobiles for the masses
By Tatum Anderson

Mobile network operators and phone manufacturers are jostling to capture a share of the quickly growing markets in Asia, South Asia and Africa.

Indian woman using mobile phone
India's economic boom has fuelled demand for mobile phones

Nestling among the designer labels in a smart Delhi shopping mall is the glittering glass front of a Nokia mobile phone shop.

A few kilometres away, Amit Bansal sells mobile handsets from a small display cabinet in a poor market district called Paharganj.

An advertising hoarding featuring a giant mobile handset almost obscures the entrance to his shop.

Both are capitalising on a huge push to sell cheap mobile phones in one of the fastest-growing mobile markets in the world.

India reported more than 137.4 million subscribers by the end of December - adding a whopping 62 million new subscribers during 2006, according to research firm Informa Telecoms & Media.


Selling mobile phones to people in the poorest countries on earth has become a major focus of the world's largest mobile handset manufacturers.

Facing a slowdown in handset sales as many richer markets become saturated, they have turned their attention to the three billion people who are living in areas where there are wireless networks, but who cannot afford to use them.

As a result market leaders Motorola, Nokia, LG, Samsung and Sony Ericsson are competing with each other to slash the cost of making a mobile phone, in an effort to appeal to millions of potential customers.

They are also competing with the huge market in cheap, illegal mobile phone imports as well as stolen and second-hand phones.

No-frills models

The market in so-called ultra-low-cost handsets is growing at a phenomenal rate - more than 14 times faster than the global handset market, according to research firm Strategy Analytics.

But the question is, just how low can these handsets go?

While the cheapest Motorola handsets sell for just under $30 wholesale and Nokia's are below $40, a handset for less than $20 has become something of a holy grail.

"To get the cheapest possible phone to the rural areas, where people have very little cash to spend, then less than $20 is the ultimate goal for the industry," says Neil Mawston, associate director at Strategy Analytics.

Delhi's Paharganj market district
Delhi's Paharganj market district sells plenty of mobile phones

Because every dollar added to the cost of the handset counts, the industry has gone full-throttle to make handsets as cheap as possible.

Most phones have black-and-white screens, rather than colour, because they are cheaper.

Few have large memories, cameras or games, because the components needed to provide these features will raise the cost.

The most expensive part of the phone is the chip, so instead of having numerous chips that each perform a particular function, newer phones cram lots of functions onto a single chip.

Many handset makers are also cutting costs by opening factories in India to avoid taxes and import duties.

Sony Ericsson announced its intention to manufacture in India this week. Motorola, which already imports components and assembles phones in the country, plans to build handsets from scratch in Chennai from March.

And on Monday 12 leading mobile operators selected a slim multimedia phone made by LG Electronics for their 3G for All campaign.

Economies of scale will cut the wholesale price of the phone by about 30%, and allow them to offer next-generation mobile phone services to consumers in developing countries at the price of current second-generation handsets.

Local needs

But some costs cannot be cut, says David Taylor, director of strategic operations for high-growth markets at Motorola.

Handsets must be very tough to withstand dust and heat in many areas of Asia and Africa.

A mobile phone is very aspirational. It's a substantial amount of their salary for the year
Devinder Kishore
Nokia India

Many handsets contain expensive, state-of-the-art batteries because so many consumers cannot charge their phones regularly.

They have intermittent access to electricity and need batteries with double the standby times seen in Europe.

Getting phones to remote areas can be complex and costly, too.

In rural Nigeria, Motorola even pays security guards to defend truck drivers carrying handsets worth millions of dollars from violent attacks .

Despite rampant cost-cutting, manufacturers cannot make their handsets too cheap.

Although ultra-low-cost handset buyers cannot afford $300 handsets, they are just as style- and quality-conscious.

"A mobile phone is very aspirational. It's a substantial amount of their salary for the year and they would not like to buy something that looks cheap or downmarket," says Devinder Kishore, director of marketing at Nokia India.


The problem is that handsets featuring colour screens, radios and the ability to download Bollywood film tunes may be in great demand, but these features make them more expensive to manufacture.

Demand for different sets of features also varies across countries, such as text messaging in various local languages. This also raises the cost of handsets, because there are fewer economies of scale.

Boys using mobile phones
India will have 500 million mobiles by 2010, the government says

Analysts at Informa suggest the dilemma may be resolved in time. As advances in technology, such as new chip designs, inevitably drop in price, mobile phone manufacturers will increasingly be able to add snazzier features to handsets while maintaining the ultra low-cost price.

One feature that could result in a huge take-up of handsets, however, is security.

Increasingly, ultra-low-cost handsets are beginning to appear that cannot easily be unlocked and used on rival phone networks.

As a result, mobile operators in poorer countries may well begin to subsidise handsets or pay for a proportion of a handset themselves - a commonplace practice in mature markets.

When that happens, poor consumers, like their rich counterparts, may be able to access mobile communications for a lot less than a month's wage.


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