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What Nokia, Motorola need to deliver in India

January 22, 2007 13:45 IST

To get a sense of how India's revolution in mobile telephony is changing people's lives, consider the case of Dashrath Pujari, a plumber who shares a modest shop with a cobbler in suburban Mumbai.

People in his neighborhood seek him out to fix their faucets, washing machines, and water leaks, but when he's out on call it falls to his 14-year-old son to pass on any messages. And sometimes the boy, who attends night school, doesn't follow through.

In the past, that cost Pujari precious business, but no more, thanks to a $32 Motofone handset he purchased from Motorola a while back. Today, he fields about eight calls a day on his no-frills, black and white screen mobile phone anytime, anywhere. His monthly income has shot up 30% to $135 a month.

He can't read, but knows how to take and make calls guided by the Hindi voice prompt on his phone. "It has changed my life completely," he marvels.

India, of course, is one of the fast-growing mobile phone markets on the planet. It's adding about 18 million new subscribers every year, and some 135 million Indians currently use mobile phones. And by 2010, that number is expected to more than triple to 450 million. (That's roughly the number of mobile service subscribers in China now.)

A Tall Order

That kind of explosive growth has big international handset makers such as Nokia, Motorola, Sony Ericsson, and Korean players LG Electronics and Samsung, in hot pursuit. Yet India is a tricky market to get right. Most of the really spectacular growth is in rural India, home to 75% of the country's 1 billion-plus population.

And that means to win there, you have to deliver functional but low-priced handsets in the under-$50 range designed to meet the needs of low-income users. That's a tall order and requires innovative design, smart manufacturing, and financial discipline to keep profit margins steady in a market, however vast, that demands more and more value.

Margins on a low-end handset run about 2% to 3%, but sell a truckload of them and you can come out ahead. The other enticement: As India continues to prosper, loyal customers will trade up to pricier phones down the road.

Motorola, for instance, spent two years researching life in rural Indian villages to get a better fix on what sort of phones it needed to design. Turns out rural consumers covet the same kind of ultra-thin design that has clicked with wealthier types elsewhere, but with plenty of battery power.

Long Life

So Motorola came up with the Motofone-launched last November-designed with the rural lifestyle in mind. The handset has bold characters and a screen that remains visible even in the bright light of day.

For those who can't read, the company developed a menu that is based on easy-to-understand icons, rather than characters, and handset software that is loaded with regional language voice prompts.

The Motofone also comes with a sturdy battery that delivers 500 minutes of talk time and 300 hours of standby time before it needs recharging. "With an immense market opportunity, it was only right for us to take the lead and design a phone targeted at this segment," says Firdose A. Vandrevala, who runs Motorola India.

On top of that, Motorola has worked with state-owned telecom operator Bharat Sanchar Nigam Ltd to come up with enticing subscription programs. Still, the pricing pressure in India is nonstop, and Pankaj Mohindroo, president of the Indian Cellular Association, thinks low-end, no-frills phones will go for under $25 during the first half of 2007.

Nandini Lakshman, BusinessWeek