Introduction

Karbonn mobiles started late in the telecom revolution in India entering the mobile handset market in 2009 only. But within the first year, Shashin Devsare, Executive Director, Karbonn Mobiles has taken quantum leaps to make his company a major player in the semi-urban and rural market. With over 5 million mobiles sold till date, Shashin aims to take on whole India replete with confidence.

Formation Of Karbonn
Two Indian telecom majors have joined forces to trigger the revolution - UTL and Jaina. The UTL Group is a multi division telecom group with an annual turnover of Rs 1600 crore and over 2000 employees. Headquartered in Bangalore, it is a leading Indian telecom powerhouse with interests that span across manufacturing, services and distribution.

 The Jaina Group is a reputed distribution house with interests in telecom and consumer durables. Headquartered in Delhi, the company has represented, with distinction, prominent brands such as Nokia, Samsung, Siemens, Panasonic and Philips (LCD devices) as regional or national distribution partners. Currently the national distribution partners of HTC and Motorola (operator business), Jaina is also the preferred distribution partner of Microsoft. UTL and Jaina now present Karbonn: phones that feature the absolute latest trends in mobile telephony, at incredible prices.

Target Customers
The multimedia phones of Karbonn address the urban markets which have begun to saturate. Handsets equipped with dual SIM cards and battery are clearly targeted at the rural markets. Though rural markets are billed as the next frontier for mobile telephony. Consumers therefore prefer phones with more than one SIM card for better connectivity. Theres a huge market in the rural areas and even the replacement mobile market is on our radar, Devsare says.

 Therefore, Karbonn made special posters and banners, etc for the rural market Consumers want more and more features at as low price points as possible. Karbonn Mobiles knows this. The company offers customers the same features and quality that they get in global brands at an affordable price range of Rs1,700 to Rs6,500. This actually is the sweet spot in which the bulk of handset sales happen.

 Karbonn's package: Value at an affordable price. "Good cameras, music and video players at the right price. This strategy, backed by the IPL deal and cricket stars Virender Sehwag and Gautam Gambhir, has boosted the brand.

 Brand-building and compelling products are necessary building blocks of the business, but they can come to naught if the retail strategy is faulty. Mobile handsets are sold through over a million multi-brand outlets in the country. Apart from the brand pull, the retailers hard sell helps the customers decision. And a retailer will push that companys brand which offers it the best profit margins. To make sure that the Karbonn brand does not lag behind others, the company is offering extremely competitive margins to dealers.

 Apart from that, Karbonn Mobiles intends to have five to ten exclusive Karbonn stores in all the major states of the country by the end of this financial year. About 25 models are currently being offered by the company, including touchscreen, dual SIM, and multimedia in both GSM and CDMA spaces. Going forward, the company plans to launch three to four models every month across different segments and price points

Impact on Existing Players

Market leader Nokia has lost almost 12 per cent market share since last year. Nokia dropped the prices of a large number of its feature phones and has launched a range of feature-packed phones in the Rs 5,000-8,000 category. It has also launched a number of models targeted at the fastmoving sub-Rs 3,000 category, where the churn is the maximum. Even in the smartphone category, it has bring out its low-cost qwerty phone C3, which is priced around Rs 5,000-6,000. Soon, Nokia will also launch two dual sim phones, a category Indian brands have excelled in. Another player, Sony Ericsson, has thrown in the towel by vacating the low-end handset market. The attack is forcing MNCs to change their strategies. After losing the game in the low-cost basic phones segment, they are now offering mid-level handsetsaimed at urban youth and executives at very attractive prices. Some of them have even launched new ranges to retain customers.

Strengths and Weaknesses of Karbonn Mobiles

Strengths Low costabout 30 per cent cheaper than MNC equivalents High on features, some of them better than global models Will offer latest features like 3G, Android at a fraction of MNC costs Weaknesses Quality, design often not up to the mark, use primitive software Servicing could be an issue, most companies are primarily importers Government rules on components, materials could erode price advantage

Major Challenges faced by the company

Naveen Mishra, IDC's Lead Analyst for Telecom believes the biggest problems lie not in brand-building or in distribution but in how the brands develop. "They have limited intellectual property, not latest operating systems, with little work on user interfaces. So while these brands win the price and features war, they will lose out at the top of the market, he says. Some of the (homegrown) phones do not meet the quality and technology standards that are required in the long run, phones with dubious quality standards and which use hazardous materials will not succeed.

 The government is finalising a set of benchmarks for materials (the plastic, metals and key components) used in cellphones to ensure they are non-toxic and hazardfree. This is a move to rein in unbridled imports and dumping from China. Adherence to these rules will add to the costs of the Indian companies. With wages rising across China, their cost advantage could erode too. These Indian brands have proved that it is possible to dent the market share of international brands. But the new entrants are also employing a very expensive strategy. Whether it will yield results in the long term is yet to be seen, says Future Brandss Santosh Desai. But then, Indian companies have always found a way out. This is not likely to be an exception. More importantly, consumers are lapping up all offerings.