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iPhone launch in India: Has Apple Dialed the Wrong Number?
India is now the third-largest Smartphone market in the Asia-Pacificregion
, after Japan and China. Quarterly shipments are more than 1 millionunits and the estimated total for the next three years is 19 million. But this isa small fraction of total handset sales.
India is the world's fastest-growingmobile services market
: In July, according to TRAI (Telecom RegulatoryAuthority of India) figures, it added a record 9.22 million subscribers in Julyto reach 296.08 million.These large numbers of users are increasingly
moving beyond basics
and itcan be said that "As the need of Indian mobile phone consumers is evolving,they are
demanding feature-rich devices
, which can cater to their business communicationrequirements as well as their personal needs.”It is believed that
Apple could gradually broaden the Indian market for the iPhone
bystarting out with "
leading-edge users who love to take on the challenge of a radicallydifferent device
and can figure it out on their own." In the process, these leading-edge users"can not only help educate others (in how to use the phone), but also help Apple learn how toeducate the others."Taking such factors into consideration,
 
at midnight on August 22,
Apple Inc.
, an Americanmultinational corporation,
rolled out its iPhone in India
and some 20 new countries. But it
didn't roll too far
. Few basic reasons for the same can be summarized as follows:-
•
Some retail outlets of the two service providers that Apple haslinked up with --
Vodafone and Bharti Airtel
--
discovered thatthey did not have the necessary permissions to stay open atthat late hour
. Others attracted a small number of curiousconsumers.
But missing were the lines and fanfare thataccompanied the iPhone's launch in the U.S. and some otherparts of the world.
•
Only a few buyers turned up at midnight launches
done by bothAirtel and Vodafone across eight cities in India.
Rival phonemakers in India were eager to claim victory in the first round
and say they were planning to build on that.
•
One reason for the lack of excitement could be the almost
total absence of anymarketing
. Newspapers reported the coming launch based on statements from Vodafoneand Airtel:
Apple was nowhere to be seen
. The local Apple office in Bangalore -- merelya sales and distribution set up -- was "not authorized" to make any statements. AndApple's Singapore operation, where press inquiries were directed, was not particularlyforthcoming.
•
Also,
Vodafone and Airtel themselves are rivals
. According to the Telecom RegulatoryAuthority of India (TRAI), in June 2008,
Airtel was number one in the wireless
 
telephone market with 69.38 million
subscribers and a market shareof 24.50%.
Vodafone was number three with 49.19 million
and17.2%. (In the number-two spot was
Reliance Communicationswith 50.78 million
and 17.7 %.) Cooperation between the twocompanies to promote the iPhone was not a likely scenario, and
theadvertising campaign announcing its arrival had been bland andbasic
.
•
Another albatross around the iPhone's neck is its
Price
. The
8GBversion costs Rs. 31,000 ($710)
while the
16GB iPhone is priced atRs. 36,100 ($825).
The corresponding prices in the
U.S. are $199and $299
. India being a price-sensitive market, these levels wereridiculous.The reason for such high price of iphone is that, unlike in the U.S. and other countries,
the service providers are not subsidizing the handset in India
. U.S. carriers are able tosubsidize the cost of a mobile phone device not just because of contractual lock in periods but also because the phone [itself] is locked so you can only use it with a specificcarrier. These practices allow U.S. carriers to recover their relatively high subscriber acquisition costs over the period of the contract. But
in India, the majority of consumers use prepaid cards and can easily switch carriers
. The economics are notconducive to subsidizing the phone.
•
Additionally,
Bharti is asking for a deposit of 5,000 rupees, while Vodafone isreportedly seeking twice as much
.
•
Making things worse,
India has yet to auction the frequency spectrum required bymobile operators to start offering 3G
, and a formal 3G launch is estimated to take up toa year. So even the rich, cool dudes who manage to get themselves an iPhone will only beable to enjoy the low-speed applications that they had access to anyway on their phonesearlier.However, despite the lack of buzz surrounding the iPhone and other potential hang-ups, someWharton faculty saw
a clever strategy at work where Apple was "testing the waters" andgetting prospective customers acquainted with its device before a full-scale marketingassault.
Skimming the Market
Apple can be said to have a smarter strategy for its IndianiPhone launch than is immediately apparent
. If one compares[the iPhone's] U.S. launch to the India launch, it is a beautifulexample of the distinction between a
'penetration strategy'
and a
'skim strategy .’
In the U.S., Apple basically wanted to bust the market open all at once. So, they had all these people
of 00

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