South Korea's Samsung and LG, already challenging top handset maker Nokia in the world's biggest markets, are taking the fight to the fastest-growing market, offering fancy phones and aggressive marketing in India.
Rock bottom tariffs, a room-to-boom phone ownership rate of just four in 100 people and galloping demand have attracted global players such as Nokia, Motorola, Samsung Electronics and LG Electronics to India's $2.5 billion market.
"The Indian market is growing rapidly and the mobile penetration rate is still low. It's got great potential," Song Sauk-hun, a Gartner analyst based in Seoul, told Reuters.
"India is a market that Samsung and LG really care about because of the sheer volume that's involved."
About 1.6 million users sign up each month, and the 45-million subscriber base is forecast to more than double by December 2005, with call rates as low as 2 U.S. cents a minute.
Song estimates more than 37 million mobile phones will be sold in India in 2005, with the annual number likely to rise to 50 million by 2008.
Korean firms entered India late, but Samsung quickly built market share with stylish phones and colour screens aimed at the high-margin sector, while LG aimed for the low- to middle range. Nokia's offerings cross the spectrum, but it has stuck mainly to low- to medium-priced bar phones.
"The Koreans are very serious contenders for the leadership position in India as they have demonstrated the ability to take share away in an exploding market," said Alpesh Shah, principal at Boston Consulting Group (BCG).
FANCY PHONES SELL
Analysts say Samsung and LG have won a following by aggressively hawking flip-tops and clamshells with polyphonic ring tones and colour screens.
"Both have a lot more advertising and marketing spend compared to other players," added Shah, who is based in Bombay.
No precise market data is available, but analysts say Nokia, with an estimated 45 percent share, is still leading.
Even so, Samsung is the largest player in the colour screens and photo-snapping handset niche, selling 100,000 units a month. With more than half of India's billion-plus population below age 25, the market is ripe for experimentation and new technologies.
"The future is colour and cameras. Mobile phones are now a tool for entertainment as well as connectivity in terms of voice and data," said Praveen Valecha, product group head at LG India.
Over the past two years, the Korean firms have piggybacked on a huge expansion drive by Reliance Infocomm Ltd., the CDMA-based mobile services arm of the Reliance group that tops the Indian market.
Reliance, which has more than 10 million users, is expanding its network to 5,000 towns from 1,100 at present, and analysts say half the firm's CDMA handset purchases are through LG.
LG first shipped CDMA handsets to India in late 2002, followed by colour handsets in April 2003 and camera phones in January 2004. By March it had over half of India's CDMA market.
LG aims to sell 3 million handsets in India in 2004, or about 7 percent of its global volume sales, said a spokeswoman.
Samsung India expects to sell 2.8 million mobile phones in 2004, up from 2.5 million last year. Analysts expect handset revenue to rise 16.6 percent on the year to about $350 million.
Nokia has fought back by entering the CDMA market and also by offering a larger menu of low-priced mobile phones in a market where more than 60 percent of phones sell for about $70.
Samsung, the third-largest mobile phone maker after Nokia and Motorola, raised its global market share to 13.5 percent in the third quarter from 11.2 percent a year ago, according to Strategy Analytics. LG, meanwhile, overtook Japanese-Swedish joint venture Sony Ericsson as the fifth largest. Its share rose to 7 percent from 5.7 percent.
SALES NETWORK ADVANTAGE
The South Korean firms enjoy another edge -- their nationwide distributor and retail presence in the domestic consumer durables market.
"What we are seeing in other markets such as China and Singapore is that consumer electronics chains are being used very, very effectively for handset sales," said Kobita Desai, Gartner's principal analyst in India.
BCG's Shah says South Korean firms with leadership positions in the $4 billion consumer electronics market have changed the dynamics of the booming sector.
European firms have been in India for years, Shah said.
"But they have not been aggressive in their aspirations. Samsung and LG have changed the landscape and price points completely," Shah added.
Both companies are now setting up plants to manufacture phones in India. Although Samsung's investment plans are not known, LG will plough $60 million into a mobile phone plant that will make 20 million GSM and CDMA phones a year by 2010. Half of those would be earmarked for export.
"There is the huge domestic market to cater to," said Gartner's Desai. "And in the longer run, the opportunity to address the needs of the global market is there."