Indian companies are investing millions of dollars to open thousands of outlets countrywide in the coming years, to sell cellphones and its related products, combining two of the country’s fastest growing sectors of modern retailing and mobile telephony.
Two of India’s cellular service providers on Tuesday announced separate plans to invest a total of $350 million in coming years. Essar Group, which operates the Hutch brand mobile service through a joint venture in India, plans to invest $250 million (Rs11 crore) to roll out 5,000 stand-alone stores and counters in malls and supermarkets in the next three years. Spice Group, which is owned by the B.K. Modi Group, will spend $100 million to open 1,500 stores in the coming two years. Spice operates cellular services in Punjab and Karnataka.
These announcements come close of the heels of RPG Enterprises, who last month said it plans to open 500 cellphone stores this year in different Indian cities. RGP did not reveal how much they plan to invest, but people close to the situation said the company may invest up to $450 million in the next two years.
Spice officials said India’s current annual mobile market of 70 million handsets will swell to 200 million handsets by 2012, and the number of mobile subscribers is expected to touch 400 million by 2010.
“The growth here is absolutely mind boggling,” said Dilip Modi, vice-chairman of Spice’s unit Hot Spot Retails Pvt. Ltd, which runs 50 stores. “We are adding five-six million mobile subscribers every month,” Modi added. The company plans to have 400 stores by December.
India has one of the lowest penetrations of fixed line phones in the world, with less than five in 100 people having access to a fixed line. The entry of mobile phones more than a decade ago improved penetration of phones, taking it to 14 in 100 for cellphones.
Rajiv Agarwal, chief executive of Essar Telecom Retail Ltd, said the mobile-handset market doubled to Rs30,000 crore in 2006 from 2005, and is expected to touch Rs50,000 crore this year. He said the overall handset market, along with its accessories, is around Rs1 lakh crore at present and is expected to grow three-fold in the next three-four years.
“It’s a very large market but is very fragmented at present,” said Priyanko Panja, an analyst at Mumbai-based Edelweiss Capital.
Meanwhile, Subhiksha, that runs hundreds of stores that stock everything from grocery to medicines, says almost 30% of its revenue is from mobile-handsets and its accessories.
Hot Spot is planning its expansion through a combination of company-operated and franchisee stores in the next two years. It expects revenues from the mobile retail business to jump four-fold to Rs800 crore in the next fiscal, and targets sales of Rs9,000 crore in the next three years.