Indian mobile phone proliferation slows

India’s booming mobile phone market, a symbol of Indian development has peaked. Subscriptions sign up – growing at 40-50% over the last three years – is likely to hit single digit growth in three years time. In addition, three key indicators show that profitability will be hit and a period of consolidation is likely.

Growth and revenues slows

Gartner Inc, a technology and market research company expect India to have 770 million mobile subscribers by 2013, up on current number of 450 million, an average growth rate of 14.3%. Reflecting this slowdown, revenues will grow at average 12.5% to around US$ 30 billion by 2013.

Passing the peak

2008 growth appears unlikely to be repeated, subscriptions jumped 50% and revenues grew 24% over 12 months. While numbers are likely to remain strong, rates of growth are expected to slow from now on.

3 key indicators set to affect profitability

Although growth is still healthy, three indicators – churn rate, proportion of pre-paid subscriptions and average billing rates – suggest profitability will be hit.

Churn rates will increase from current levels of 53.2% to 59.6% by 2013, making harder for telco’s to hold on to existing customers. Postpaid subscription market – most profitable service – is set to decrease from 7% of overall market to just 4% during the same period. Despite 3G and other value added services hitting the market, most new subscriptions will come from poorer rural India; this factor will inevitably drive down average bill sizes.

Consolidation

While there are currently 14 operators in the market, tougher conditions are expected to lead to sector consolidation. Gartner expect this number to drop to between 8 and 10 in two years. They also conclude that in the long term the market will be able to support just 5 major operators. Expect a phase of acquisitions.

McDonald’s set the standard for India market entry

Cultural sensitivity isn’t always a quality associated with McDonald’s. Rightly or wrongly (depending on your point of view) the brand has been labeled as uncaring, unhealthy and imperialistic. However, in India it appears that their market entry strategy has earned them a number of fans and many Rupees.

Setting the standard

Over a conversation with an Indian retail expert our attentions turned to western retail brands and India market entry. My friend was very clear in terms of which brand had managed the transition best, without having to tinker with their core brand values or the fundamentals of their business; McDonald’s was the clear winner.

Products and Price

Through use of a joint venture arrangement they have successfully developed products and a pricing strategy to suit the local market, based on the fact that they have 160 restaurants across India you have to say it works.

Product: The McDonald’s menu in India contains no beef or pork, there is also an extensive vegetarian menu. Vegetarian and non-vegetarian food products are kept separate throughout the sourcing, supply chain, cooking and serving processes.

So while you can’t buy a hamburger or Big Mac, you can buy a McAlloo Tikki or a McVeggie burger.

Price: A price point of around – equivalent of – 20p for a burger means that McDonald’s has mass market appeal, making it a viable option for the majority of the population, not just an expensive treat for the more affluent.

McDonald's India

Riding India’s demographic wave

While McDonald’s know older generations brought up on a different cooking style are unlikely to chose to eat from their menu, India’s young demographic allows the company to concentrate on attracting younger consumers, eager to try newer food concepts.

Local knowledge

While some retailers see joint ventures as unsatisfactory, McDonald’s have benefited by tapping in to local knowledge and developing cultural understanding. Following four years of preparation and twelve years of trading, McDonald’s have established the perfect business at the perfect time, without compromising their core brand.

Mumbai malls fail taxi driver test

A quick test to find out whether any single mall in Mumbai stands out from the rest. Not scientific by any means but feedback to the question, “Of all the shopping malls in Mumbai which one should I see”, produced some interesting comments, one in particular was more interesting than others.

The theory

My theory is in a booming market full of eager retailers looking to expand and consumers willing to spend, building profitable shopping malls is relatively easy. When these dynamics go in to reverse things aren’t so simple, a scenario facing India.

The squeeze is being felt, AsiaProperty magazine have reported that 11 of 15 malls on MG Road, Gurgaon, have had to refit to create mixed-use schemes as demand for retail space slows. In my opinion part of the reason is that developers have been building malls, not building brands, they have been busy badging “me-too” malls instead.

While a well-positioned and clearly defined brand wont solve all problems, it will help malls stand out from the crowd. More importantly it will help the developer make informed decisions about the tenant mix and service offer based on an understanding of who their target customer is.

The question

Having asked the question, general consensus was that Inorbit Mall – due to its size – was the place to go. While the size of a mall can be important, a competitor can always build a bigger mall, in India where malls are in close proximity this would be a real problem. Regardless, I set off in a taxi with a relatively open mind.

The Taxi twist

The taxi driver spoke good English and asked what I wanted to buy. Having told my story he suggested the Oberai Mall instead. His reasons were telling, it was closer and in his opinion all Mumbai malls were the same, as he put it, they have McDonalds, cinemas and the same shops.

If taxi drivers can see this, the customers they deliver to malls can too. If the retail and leisure mix isn’t providing differentiation, the brand has to. If this scenario is correct Mumbai shoppers are likely to be visiting the mall nearest to home, making customer attraction and retention increasingly difficult.

Nokia top India’s ‘most trusted’ brand survey

For the second year running, Nokia has topped India’s prestigious ‘Brand Equity Most Trusted Brands (MTB) Survey’. Now in its sixth year, the survey run by Nielsen on behalf of the Brand Equity publication shows the strength of India’s FMCG segment, eight of  the top 10 fall in to the category of frequently purchased consumer products. The findings also show how locally established brands remain competitive against international entrants.

Hindustan Lever lead the way

Hindustan Lever (part of Unilever) dominates with three brands – Lifebuoy, Lux and Pepsodent – in the top tier, and a total of seven in the top 20. However, their Pond’s brand is also the biggest faller, dropping to sixteenth place, down eleven places on last year.

Reliable Reliance Mobile

There are two new entries in this year’s top 10. Horlicks, owned by GlaxoSmithKline and one of the oldest brands in India jumps in at number 6, following years in the top 20 but it is Reliance Mobile at number 10 which stands out most. Having never featured in the top 20, Reliance Mobile takes its place at number 10. Given its high profile sponsorship of the Twenty20 World Cup, it will be interesting to see – despite India failing to retain the trophy – whether the brand receives a boost in next years survey.

Mobile phone brand boost

Reflecting the remarkable growth of India’s mobile phone sector, it isn’t surprising to find that telecom brands are becoming increasingly influential. In addition to Nokia and Reliance Mobile, Airtel (12th), BSNL (19th) and Vodafone (30th) all break the top 30.

Local and International brands

The list contains an interesting mix of local and International brands. While mega FMCG and technology brands like Pepsi (26th), Coca-Cola (32nd), Sony (38th), Motorola (81st) and Nestle (99th) find a place in the top 100, locally established brands – some admittedly now owned by international brand owners – are represented through out.

State Bank of India (13th), Life Insurance Corporation of India (17th), Parle Products (22nd), Dabur (28th), Godrej (44th) and Fevicol (54th) prove that where “trust” is concerned, local brands can compete strongly against international brands and their owners.

To see the complete list of India’s most trusted brand click here.

India Insights update – India trip 15 – 25 June

Apologies for the slow down in content this month, time has been scarce as I have been finalising a research trip to Delhi and Mumbai. The trip between 15th and 25th June provides an opportunity to catch up with a number of Indian opinion formers and pioneers, including business men, industrialists, the editor of a national newspaper, an author and an ambassador. 

Many thanks to Rahul Mittra of Brandsmith India for his assistance.

Should be good! I will report back soon.

Dominic

email me at – dominic@india-insights.co.uk

follow me on twitter – www.twitter.com/india_insights

Indian youth drives increase in India e-payment

Improving internet access and security and the popularity of the mobile phone are factors set to accelerate e-payment transactions.  While India’s consumers have traditionally preferred to pay in cash for purchases, younger consumers are adopting more convenient and faster methods of payment.

70% growth in e-payments

Value of India e-payment market is predicted to grow to between US$ 150 billion and US$ 180 billion by 2010, representing 2-year growth of 70% according to research and consulting firm Celent.

Low number but high value transactions

Celent’s report, “Payments in India Going e-Way” shows that while cash is king – 63% of total payments by volume are made using Rupee’s – transaction value is weighted in favor of electronic payment methods, 75% of payment value comes from e-payment.

Debit and credit cards

This sea change in buying behavior will be reflected in adoption of debit and credit cards. The debit and credit card market grew at a compound annual rate of 128.7% between 2004 and 2008.

Celent estimates India has 130 million cards in circulation and that this figure will hit 210 million by end of 2010. Of this overall figure 169 million will be debit cards (up on current figure of 102.4 million), the remaining 40 million will be credit cards, up from 27.5 million.

Despite the difference in numbers, total credit card transaction value is set to eclipse more popular debit card transaction value. It can only be hoped that a preference for credit doesn’t become a reliance on credit, a scenario facing many UK consumers, the BBC report that UK personal debt now totals close to £1.5 trillion.

India’s youth driving change

As with nearly all growth industries in India, the country’s young population is responsible for shaking up conventional consumer behavior, estimates suggest 18 – 25 year olds contribute 46% of all online bill payments.

Having grown up with technology e-payment is the norm. Increased internet use has removed borders, and easy to use PayPal is making international internet transactions safe as well as convenient.

TED, the ultimate “brain spa” comes to invigorate India

More proof (were it needed?) of India’s rising profile on the global stage. TED – short for Technology, Entertainment and Design – plans its first India conference, to be help on Infosys Campus, Mysore from 4th – 7th November.

Bill Gates, Bill Clinton and …. Bono

For the last 25 years TED has brought together leading thinkers from these three world’s along with leading innovators from the worlds of science, business and the arts. Their challenge is to inform and inspire their audience – often a mixture of CEO’s, scientists, creatives and philanthropists – with an 18 minute talk. Previous speakers have included Bill Gates, Bill Clinton, Sir Richard Branson, Philippe Starck and Bono.

Big questions in a big country

Established to tackle the big questions of our age and challenge conventional wisdom, TED’s arrival in India is yet further acknowledgment that India willl play a major part in global affairs and the way in which our planet develops.

TEDIndia Fellows

Before Mysore, TED will select 100 promising individuals, or “Fellows” from around the world to attend the conference completely free of charge. Each will then have the opportunity to become one of twenty people to be selected for the three-year Senior Fellowship.  

The program seeks remarkable thinkers and doers who have shown unusual accomplishment, exceptional courage, moral imagination and the potential to increase positive change in their respective fields.

The program focuses on innovators in technology, entertainment, design, science, film, art, music, entrepreneurship and the NGO community, among other pursuits. Applicants are generally between 21-40 years of age, though anyone over 18 and over 40 may apply.

They must also be fluent in English; though moderate fluency will be accepted on a case-by-case basis.

Further information

To learn more about TED and the Fellowship program, please click on the links below:

TED – www.ted.com

TEDIndia – http://conferences.ted.com/TEDIndia

TEDIndia Fellows – http://www.ted.com/index.php/fellows

TED Fellows Videos – http://www.apnatube.com/members/action/viewvideo/9688/

TED Global Fellows 2009 – http://tedfellows.posterous.com/ted-conferences-announces-list-of-25-ted-fell

Follow TEDIndia on Twitter – http://twitter.com/TEDIndia