New Delhi: After introducing the lowest tariffs in the world, Indian mobile operators, expanding into low-income and low-usage rural markets, are now offering the lowest handset prices in the world.
Reliance Communications Ltd, bracing for the arrival of Vodafone Group Plc., which has already announced plans to introduce ultra low-cost handsets, became the first operator in the country to offer phones at less than Rs1,000, introducing three models priced between Rs777 and Rs888, a third cheaper than any phone available in India.
Indian operators as well as handset makers are coming out with cheaper and cheaper phones—with Nokia expected to unveil another series of low- cost phones on Thursday—as operators invest billions of dollars in expanding the mobile networks into new areas. In all, operators are expected to double the number of wireless base stations in the country to around 200,000 this year, mainly in the rural areas.
S.P. Shukla, president of R-Comm’s personal business, confirmed that the firm was indeed targeting users whose only other option would have been to either not get a mobile or buy a second-hand one. “Our prices are a first of its kind by any company not only in India, but in the world,” he claimed. R-Comm declined to say who is manufacturing the cheap phones, which will be sold under the Reliance brand.
R-Comm’s launch comes two months after its fellow CDMA-competitor Tata Teleservices Ltd introduced a single-chip CDMA phone priced around Rs1,299. Tata’s cheapest phone is now priced at Rs1,200, currently the lowest in India. Devoid the volume discounts enjoyed by CDMA operators who order handsets en masse from manufacturers based in China, Korea and Taiwan, GSM operators have had to make do with phones, the cheapest of which are in the range of Rs1,300-1,500. Vodafone, the British operator that is in the process of taking the majority stake in the third-largest GSM operator, Hutchison Essar, has already said it will gun for the rural markets with tailor-made phones and bundled services.
“We believe the biggest opportunity in India is in the rural market,” Arun Sarin, the British company’s India-born chief executive, had said during the company’s announcement of the Hutchison buyout. “And we believe we will be able to take advantage of our extensive supplier network around the world, and the scale that it gives us, to offer bundled handsets at unprecedented levels in India.” Around the same time as Sarin announced Vodafone’s entry into India, the company had also entered into an agreement with Chinese manufacturer ZTE Corp in February for supply of what it called “ultra low-cost” handsets.
However, unlike in the US and Europe, where operators bundle subsidized phones along with the initial connections, in India, none of the service providers supply handsets below their procurement costs. R-Comm, too, said it was not subsidizing the cost of the cheap phones. “We are passing on the benefit of mass procurement to our consumers,” Shukla said.
Industry watchers, however, said that offering cheap, stripped-down phones, instead of subsidizing them, may be a good ploy to attract reluctant first-time users in low-income markets. But with increasing awareness about mobile phones, subscribers are likely to demand more.
Yuvraj Mehta, spokesperson for Samsung Telecom India Pvt. Ltd, which supplies CDMA handsets to R-Comm that are sold for around twice the prices announced by the operator on Wednesday, said long-term viability will depend on branding and quality. “In the long run, we believe even people in the rural market will prefer something with quality even if they have to pay a few hundred rupees extra,” he said.
Abhineet Kumar contributed to this story.