For capturin g market share and revenues in emrging markets like India

Abstract

The wireless telecommunication market has seen tremendous growth rates in the last 2-3years, especially in emerging markets like China and India. This project attempted to understand and compare the Chinese and Indian Mobile telecommunication markets and draw key insights and learning s for defining Indian wireless telecom market. These learning's and insights, we believe, will be valuable to several key stake holders in Indian market and especially to mobile phone vendors such as Motorola. The report starts by looking at Indian market in 2003 and also summarizes the key worldwide trends in the global wireless telecom markets. The parameters cover the whole gamut of the wireless telecom space, like various market indicators of the worldwide wireless markets such astele-density, total number of subscribers, tariff rates, technology based split (GSM versus CDMA), capital expenditure to revenue ratios and other similar parameters. The report then compares these worldwide trends with the current trends in Indian wireless market. Chinese wireless telecom market in the last 3-5 years is studied in detail and so is Indian wireless market to compare and contrast the key strategies. To compare and contrast Indian and Chinese markets, the report used a four-dimension model based consisting of Regulation, Market, Consumer Demand and Handsets model. Each one of these dimension's evolution is captured in various "horizons" which is typically caused by changes in political, economic, social and market conditions or environment at various points of time. The inflection points" define the beginning of a new horizon in the growth curve of the dimension under consideration. The causes for these "inflection points" provide valuable insights for defining strategic options for all the stakeholders in the wireless handset market. Several observations are recorded in the report based on the inflection points noticed on the growth curves of these two emerging markets. A sample observation coming from this analysis is that, due to tremendous competition among the various handset vendors, similar capability handsets using different technologies (e.g. CDMA, GPRS) are available to end customer at almost the same prices removing any price based disparity, which might mean underlying technology does not matter anymore from an consumers point of view. From the operator's perspective, the revenues, ARPU is coming under intense pressure due to multitude of choices available to consumers. An interesting example for this is China Unicorn's CDMA service offering that is competing with China Mobile's GSM service based on the low pricing strategy of Unicom. The price war has come to dangerous levels, which can undermine the profitability and hence the future evolution and growth in wireless markets. Chinese government strategically ensured that various foreign vendors collaborate with the local handset manufactures by regulation. This step enabled the low cost consumer electronics giants of China to globally compete in technologically intensive handset markets as device manufacturers. By year 2003, the combined Chinese domestic players captured 55% of Chinese handset market displacing both Motorola and Nokia to 2nd and 3rd slot respectively. In contrast, Indian government does not provide similar regulations for foreign handset manufacturers. However, it will be worthwhile option for multinational manufacturers to explore manufacturing partnerships with some of well-known Indian consumer electronics goods manufacturers. As Chinese experience strongly indicates that domestic players do have better advantages in terms of local market knowledge, local regulatory and cultural issues that may have been ignored in a foreign vendor's generic strategy. From analysis, it becomes very clear that chaos in the Indian regulatory process delayed the mobile revolution by at least 4 years. The major factor responsible for this delay was making incumbent responsible for both "regulatory" and "operational" authority. This is in contrast to Chinese deregulation process where government held 51% share in each of the operators. The government ensured that there is no monopoly in the market and "controlled" competition with respect to technologies (CDMA, GSM) and operators (Chine Unicom and Mobile). Other factor responsible for the delay was Indian government's perspective on de-regulation. It was seen as a way to reduce fiscal deficit through hefty license fees, which lead to situation of 1998-99 of operator's defaulting on the license fee payments. Another aspect of the report is to look at the consumer trends in two countries with respect to mobile handset vendor and technology preferences, pricing ranges, age group segmentations, replacement cycles which are extremely important from the handset manufacturer perspective. An important insight emerging from the analysis is that greater percentage of Chinese subscribers are opting for feature rich, higher end phones in contrast to basic voice centric devices. Similar trends are expected from the Indian markets. The report concludes with few key insights drawn out separately as a high light and implications of these strategic insights to handset vendors like Motorola.