DQ Top 20: Smartphones - Twist in the Smart Tale

Smarter, quicker, more efficient and increasingly affordable. These were few

things that defined the smartphone market in the previous year. But, there was a

big twist in the tale. The smartphone market which undoubtedly is one of the

segments with the maximum hype around it, took everyone by surprise last year.

Contrary to all expectations (including ours), the smartphone market recorded

a sharp dip in FY10. The sales took the downward plunge and apparently, a lot of

people compromised on their handsets thanks to the slowdown. Come to think of

it, the executive classthat is the biggest buyer of smartphones in Indiawas

indeed the one that suffered the most during the slowdown. With pink slips and

salary revisions being the order of the day, fancy phones werent on the

priority list for a lot of people.

Another reason for the steep dip was the erratic VAT hike across a few

states, including Maharashtra and Madhya Pradesh, which affected sales and

diverted several purchases to the grey channel. Also, FY10 was a year marked by

the excitement wave around Apples iPhone. Maximum purchases of the iPhone

happened through illegitimate channels. That also, to some extent, would have

affected the official retail sales.

All these factors resulted in a shocking dip of almost Rs 1,500 crore in the

overall smartphone market. The overall market stood at Rs 4,465 crore in FY10,

down by 23% from Rs 5,800 crore in 2008-09. However, enthusiasm around the

segment managed to retain its all time high with OEMs getting innovative,

service providers getting collaborative and consumers getting educated.

Definition Dilemma



Define a smartphone? That was the question that we at Dataquesttogether

with a lot of industry players including a gamut of OEMs, analysts and

expertsdelved upon for several days. The conflict here is that there is no

single, unanimously accepted definition of the termsmartphone. Almost all

manufacturers define it differently and analysts have a different story to tell.

While some go by the definition of push email and online integration

features, other simply include all platform based phones in the category.

Whatever said and done, there seems to be no clear demarcation between

smartphones and feature phones.

In order to bring more clarity in the segment, for this analysis Dataquest

defines smartphones as phones capable of running sophisticated consumer or

enterprise applications which are installable on the device after purchase. The

degree of application sophistication required to justify a device being

positioned as a smartphone rather than a feature phone is governed by a number

of factors, many of which relate to the operating system (OS) the device runs.

The OS must be fully featured, including the support for an extensive set of

APIs and have application capabilities beyond those of the basic run-time

environments like Java ME which is present on most phones, either through

extensive run-time environment extensions or through the ability to run native

code. It must be possible to store data and execute some applications locally,

that is without the need for a live network connection. The OS must be open to

and be supported by a coherent third party developer community which has access

to tools, documentation and support needed to create these applications and

exploit hardware capabilities of the device. Applications must be able to

provide configurable two way synchronization to the users main PC or web based

information store (including personal and business email, contacts, tasks and

calendars) and rich web browsing.

That definition makes the classification less complex. We have thus included

all OS phones, including Symbian, Windows, RIM, Apple, etc. In the Indian

landscape, Symbian has the strongest footprint with a lot of OEMs adopting it as

a platform. For clarification purposes, we have considered all S60 OS phones as

smartphones.

Also, for calculation ease, Dataquest does not take into account the grey

market for smartphones as putting a number to that is nearly impossible.

Screen-tamers



When it comes to vendor play-out in the smartphones domain, there are

several opinions. While the stance is pretty clear on some vendors like RIM and

Apple who are present only in the smartphone space, the problem arises when it

comes to cross category vendors like Nokia and LG. In fact, even LG has only a

couple of phones that it labels as smart. Nokia, however, is more of a complex

case with hundreds of phones in the market.

However, in the circumference of our definition, some forty-three phones of

Nokia qualify for this category. This basically includes its Symbian60 (S60)

phones. Symbian, as we mentioned, has the lions share of the OS market in

India, and Nokia uses only Symbian as a platform for its devices.

Nokia is the obvious leader in this segment. While it has lost substantial

market share to competitors like Micromax and Samsung in the overall mobile

market, it has managed to hold tightly to its position in the smartphones

domain. In FY10 however, Nokia too saw plunging sales through its official

channels and also lost some ground to BlackBerry, its closest competitor in the

Indian market.

Nokia reinforced its focus on the high-end category by launching ten new

smartphones this year including N97, E72 and 6700 Classic. It is also

aggressively transforming itself into a services company rather than just an

equipment manufacturer. Given the dip in units sold last year, Nokia pushed its

embedded services like Ovi Life tools, E-messaging and IM. It also tied up with

various service providers for providing special tariffs and bundled SIM cards at

the point of purchase.

FY10 thus saw the Finnish giant actively pursuing its motto of massifying

smartphones. The most successful models were perhaps the E series (E63, E71)

that increasingly made it to the hands of business executives and travelling

personnels.

It was RIM, Nokias distant second competitor, that saw immense action in the

year gone by. RIM moved beyond the enterprise domain and for the first time

actually targeted individuals by launching personalized, varied colored

BlackBerries in its Curve range which is also its least priced series. A big

move on part of RIM was the appointment of Redington as a national distributora

strategy that ramped up sales significantly. As a result, RIM moved beyond the

metros and penetrated into over seventy odd cities.

Keeping in mind the mobile landscape in India, RIM went ahead and launched

its prepaid services as well. It also made available the access to more than

1,000 applications including popular ones like Cricinfo, MoneyControl, Hungama

Music, etc. RIM saw around 1 lakh downloads a day on an average in the last

year.

However, it was mostly the enterprise focus that worked wonders for RIM and

made the last year a phenomenal one for the company. RIM bagged some impressive

deals last year including mobilizing (or should we say smartening) the police

forces of Bengaluru and Pune that have deployed 650 and 100 BlackBerry devices

respectively so far. It also did an implementation for Nanavati Hospital in

Mumbai and is actively pursuing healthcare as a potential vertical for big

deployments.

Other enterprise deals were a mobile SAP deployment for Adani Group, sales

force mobilization for Coca Cola and a deployment for the faculty of IIM

Bangalore.

Apart from these two players, the other partakers of the pie were Apple,

Samsung and HTC. In case of Apple, the figure of its share would have been much

higher if the grey market had been taken into account as most of the iPhone

sales happened through that channel. Its organized retail sales, however, are

miniscule.

Samsung became serious about its mobile business only during the last year

and ended up gaining a lot of traction, thanks to some offerings like the Corby

series. Its standing also improved in the smartphones space. Unlike Nokia,

Samsung has no strict loyalties and has been experimenting with its OS. Samsung

handsets are based on Bada, Symbian, Windows and Android OS.

HTC, again a player that deals only in smartphones, has so far been unable to

make deep inroads into the Indian market. However, it has charted out some

aggressive marketing plans, the results of which shall perhaps have an impact

next year.

The other players like Motorola and Sony Ericsson, with limited offerings,

form a small part of the overall market though smartphones is one category where

every vendor is expected to come alive sooner than later and make it a stiffly

competitive market.

Smartricks



The smartphone numbers are expected to double in FY11. And, if we are to

compensate for this years low crest, the boom is more than required. However,

there were some trends that defined the smartphones market this year.

One apparent phenomenon was the emergence of smartphone as a service device

rather than a browsing/emergency pocket tablet. FY10 was truly the year that saw

businesses being run on phones. The application push was the other trend that

was visible amongst the OEMs. While RIM pressed a number of applications, Nokia

embarked on a reaching out drive through its Ovi apps.

Also, the push email that BlackBerry evangelized saw some mass adoption in

the last year, with Nokia beginning similar services.

But, there is one trend that a lot of us have missed. Despite the variety

available in the smartphone devices space, there is almost a monopoly when it

comes to operating systems. Symbian Foundation in the Indian market is more than

72%; and other OS like Windows, Android, Bada have failed to perform as compared

to Symbian.

Its a pull-push relationship that Symbian and Nokia share, each is the

biggest by virtue of the other.

The smartphones landscape however might look very different next year. What

with the huge debate on BlackBerry services gathering heat and a biggie like

Google bringing its Android phones into the market.

Mehak Chawla



mehakc@cybermedia.co.in