The mobile phone giant you've never heard of

NEW DELHI, India — When the World Cup kicked off last month, residents of metropolitan India were a little perplexed at the advertising blitz that came along with it.

Instead of the usual host of international and domestic giants like Vodafone and Reliance, the biggest spender appeared to be a company that nobody had ever heard of. Its name is Micromax. It makes mobile phones. And it's Indian.

The knock on India has always been that it doesn't do hardware. But the latest news in the country's red hot mobile market is local. Building on a bundle of bargain-priced, innovative features and a lucrative revenue-sharing agreement for dealers, upstart handset maker Micromax has over the past five years quietly surpassed Korea's LG Electronics to become the third largest player in the world's fastest growing mobile market. And now a dozen-odd copycats suggest that the trouble is just beginning for traditional heavyweights.

"They have acquired nearly 12 to 15 percent share in the Indian handset market [in just a few years]," said Shushmul Maheshwari, head of market research firm RNCOS. "The coming five years will definitely prove a big blow to the traditional giants like Nokia, Samsung and LG."

With close to 10 percent of India's 100 million-handset market — and a target of 20 percent — Micromax, for one, is already expanding internationally. The company has offices in Hong Kong, Dubai, Nepal and the United States. And Vikas Jain, the company's CEO, says others won't be too far behind. "You might see a lot of the Indian portfolio going global now," Jain said.

"Indian players are innovative and offer low-cost handsets, which have great potential in underdeveloped and developing countries like Nepal, Bhutan, Srilanka, Bangladesh, Middle East and some Latin American countries," said Maheshwari.

India's $10 billion-handset market has gone from only five players in 2008 to nearly 30 different phone makers in 2010. And with new players taking nearly 20 percent of sales at the end of 2009, according to International Data Corporation, it looks like a whole new world.

Apart from Micromax, there are a host of new local players, like Karbonn, Lava International, Maxx Mobile Communications, Spice Mobiles and Zen Mobiles.

But that's not the only story here. While some of the local mobile companies are linked to bigger Indian empires, Jain and his three partners are all first-generation entrepreneurs — the exception in India's family-centric business culture.

And where most companies still prize seniority, not a single employee at Micromax's corporate headquarters in Gurgaon looks a day over 25, and two or three, including the head of press relations, may not yet have started shaving. This is the new India and they're not likely to settle for nibbling around the edges of the low-end market segment.

The initial key to Micromax's success was a cheap phone with a powerful advantage over other models — at least for the rural customers who were the company's first target market. Capitalizing on consumers that weren't familiar with global brands and retailers who were keen to reap better margins than those offered by the big guns, Micromax launched a phone with a marathon 30-day battery life, a huge boon for customers without regular electricity supply.

Then it began to differentiate. Defying conventional wisdom, it offered dual SIM card phones at bargain basement prices — and scored with ultra-cost-conscious buyers who use one number for free incoming calls and swap prepaid SIMs in and out of the other slot to take advantage of the cheapest call rates.

To tap young buyers, the company launched the country's first sub-5,000 Rupee Qwerty keypad phone. To tap the "second phone" market for gadget-keen women, it launched a cosmetics compact-shaped handset studded with cubic zirconium and fitted with a makeup mirror. Another model doubles as a TV remote. Another a motion-sensitive video game controller. And now it's fighting for a piece of the high-end smart phone segment with a wifi-and-3G-enabled Windows handset. Scattershot, check. Weird, check. The company's ad slogan, after all, is "Nothing like anything." But the strategy is working.

"We're trying to make a new segment in the industry — where technology comes cheap," said marketing executive Andre Augustine.

According to Jain, the secret to the revolution is Taiwanese chipset maker Mediatek, which powers most, if not all of the new handsets. Mediatek has lessened the time it takes for a phone to go from being an idea to being sold in stores — it used to be eight to 12 months, now it's three or four. By reducing the time spent on research and development, it's also driven down costs. And that could be just the beginning.

Recently, Mediatek inked deals with Google's Open Handset Alliance and Microsoft to push Android- and Windows-based smartphones deeper into the low-end market, which could position India for the long-awaited computing revolution that has so far never arrived.

“There is a huge thirst for smartphones in emerging markets. For many people, the phone rather than the PC is the main entry point to the internet, resulting in a high demand for rich communication devices," Microsoft said in a press release.

The utopian vision is familiar. Though most villagers still say a buffalo would do more to improve their lives than a PC, it can't be denied that the access to information provided by mobile phones has
boosted incomes and improved lives for the poorest Indians. Fishermen use mobiles to locate the best market for their fish from offshore. Villagers use them to avoid missing work on fruitless journeys to the city. And plumbers, electricians and vegetable vendors use them to keep in touch with customers while they're out working.

If the fewer than 10 percent of Indians who presently have access to the Internet were to increase, it could spark new interest in literacy, facilitate telemedicine and expand the impact of the country's much talked about e-governance initiative — which already limits the influence of touts and fixers. Not only Microsoft is betting that it will be phones, not computers, that do the trick.

"We are going to see big growth (in the smartphone market)," said Pankaj Mohindroo, president of the Indian Cellular Association. "We are expecting the number to move from 6 million to 20-25 million in two years time."

India's mobile platform is gearing up for 3G — which offers broadband-type data transfer speeds. And of course Nokia, Samsung, HTC and others are already offering handsets billed as cheap smartphones. Some of these phones retail for less than $200. But there's affordable and then there's rural India affordable.

To get there, it might take some good old fashioned Indian innovation, otherwise known as jugaad.