india: ultra low-cost handsets, january 2007 – october 2007

© Copyright 2006. Yankee Group Research, Inc. All rights reserved.

India: Ultra Low-Cost Handsets, January 2007 – October 2007

India: Ultra Low-Cost Phones, Jan – Sept 2007© Copyright 2006. Yankee Group Research, Inc. All rights reserved. March 5, 20072

Description of Contents:

• The attached file contains Yankee Group’s analysis of the price and volume relationship of handsets imported into the Indian market. The analysis is based on comprehensive import data from Indian government sources. Data describes the landed cost of imported units by manufacturer, primary air-interface technology, unit volume, and model designation.

• In this exercise, particular attention is paid to the comparative trending between CDMA and GSM units.

• Data in this analysis does not represent the entirety of handset volumes selling into the Indian market at a wholesale or retail level. The Yankee Group notes that, since 2004, significant domestic manufacturing capacity has been established by leading manufacturers such as Samsung, LG, and Nokia, among others. Units produced in these facilities are estimated to contribute 44% of total market volumes. Units produced in these facilities are also known to be exported.

• The price data used in this and previous analysis does not include additional fees and costs such as import duties, insurance, and other costs related to distribution that may be reflected at the retail, wholesale, or transfer level. Average selling price (ASP) terminology refers only to landed price data reported by official Indian government sources, and does not convey wholesale or retail price expectations. Since additional costs are generally applicable to all units, Yankee expects that the relative trends between GSM and CDMA volumes highlighted are valid.

• Yankee Group has reported on this market’s dynamics previously, relying on exhaustive Indian Customs import data obtained from a third party, Infodrive India Pvt. Ltd of Calcutta, India.


Summary of Findings for the Period from January to October, 2007

• 62% of imported units are sub-$50

• 78% of sub-$50 imports were CDMA units

• 94% of CDMA imports were Sub-$50

• Total CDMA import volumes exceed GSM by a margin of 52% to 48%

• Favorable reaction to broadening low-end offerings evident

• There are indications of a high degree of demand elasticity evident in overall price:volume trending

• Nokia shows a 34% ASP premium on average over the total GSM ASP

• CDMA ASPs are 68% lower than the GSM market average


CDMA Imports Leading GSM, With Volumes Driven by Low Cost Units

• CDMA models accounted for 52% of all observed imported units for the period• Massive ASP delta of $72 between GSM and CDMA averaged over the period

Import Volumes and ASP by Technology

$92$101

$107$116 $118

$111 $110$118

$90

$101

$35$40

$34 $31

$43

$32 $32 $33 $30 $32

-

500

1,000

1,500

2,000

2,500

3,000

3,500

Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07

Un

its

(000

)

$-

$20

$40

$60

$80

$100

$120

$140

AS

P (

US

D)

GSM Devices CDMA Devices GSM ASP CDMA ASP


Sub-$50 Units Dominate Imports for All Technologies

• On average, sub-$50 units accounted for 62% of all observed handset imports for the period with a distinct growth trend

• Price:Volume trend lines show the market responding favorably to broader availability of low-cost models in all technologies

Sub-$50 Unit Volume and ASP

$31.12

$29.93

$33.77

$29.26

$30.60

$32.86

$30.48

$29.71 $29.22$28.55

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500


Un

its

(000

)

$25$26$27$28$29$30$31$32$33$34$35

AS

P (

US

D)

Sub $50 Units ASP ($) Linear (ASP ($)) Linear (Sub $50 Units)


CDMA Imports Dominate Sub-$50 Import Volumes

• Import Market Origin Summary:– China: 34%– Korea: 29%– Taiwan: 18%– Other: 19%

• Chinese Manufacturer Summary– ZTE: 57%– Huawei: 23%– Haier: 8%– TCL: 4%– Jinpeng: 3%– Other: 5%

• Strong Chinese vendor presence with balanced contribution from other key global supply bases

Sub-$50 Imports % of Volume by Technology

25% 24%13%

37%31%

14% 15%27%

19%

75% 74% 76%87%

63%69%

86% 85%73%

81%

26%

0%

20%

40%

60%

80%

100%


GSM CDMA


GSM vs. CDMA Volume and % of Sub-$50 for all Tech. Imports

25% 26%24%

13%

37%

31%

14% 15%

27%

19%

75% 74%76%

87%

63%

69%

86% 85%

73%

81%

-

500

1,000

1,500

2,000

2,500

3,000

3,500


Un

its

(0

00

s)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

GSM CDMA % of GSM % of CDMA

CDMA vs. GSM Sub-$50 Import Volume Comparison

• CDMA accounts for 78% of Sub-$50 imports observed in the period – 3.5x more units imported than GSM

• Total CDMA imports are almost exclusively Sub-$50 for the period – 94% of all CDMA imports were sub-$50

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Sub-$50 GSM and CDMA Volume and ASP Observations

• Sub-$50 GSM and CDMA ASP gap shows signs of narrowing, but unit volume disparity remains significant

• ASP gap closure driven by sub-$30 GSM import average increase of 56% per month from August-October

• Nokia’s contribution to sub-$30 volumes increased from 15% from January-July to 22% from August-October

Comparison of GSM and CDMA Sub-$50 Import Volume and ASP Trending

$35$38

$35 $35$36

$34 $34 $35

$29 $28$29$31

$29 $28

$32$30 $29 $29 $29 $29

-

500

1,000

1,500

2,000

2,500

3,000

3,500


De

vic

e V

olu

me

(0

00

)

$-

$5

$10

$15

$20

$25

$30

$35

$40

AS

P (

US

D)

GSM Devices CDMA Devices GSM ASP CDMA ASP


Nokia’s Import Volume and ASP by Technology

• Nokia's GSM average import volume is substantial, ~40% of total GSM imports in the first nine months of 2007, while commanding a price premium of ~35%.

• Nokia's CDMA average import volume is relatively small, < 5% of total CDMA imports, since their pricing is ~150% higher than the market average.

• Nokia’s CDMA volume is nominal relative to both Nokia GSM and all CDMA volume• CDMA unit ASPs still higher than total market by ~ 2x month-on-month

Nokia Volume and ASP by Technology

$144 $148 $150 $155$144

$129

$155

$130$120

$143

$94 $89

$60$67

$119

$141

$90$78

$65 $70

-

200

400

600

800

1,000

1,200

1,400

1,600


Dev

ice

Vo

lum

e (0

00)

$-

$20

$40

$60

$80

$100

$120

$140

$160

$180

AS

P (

US

D)

Nokia GSM Devices Nokia CDMA Devices Nokia GSM ASP Nokia CDMA ASP


Vendor Diversity a Hallmark of CDMA Sub-$50 Imports

MODEL # UNITS MODEL # UNITSMOT C168 392,080 ZTE CLASSIC 202 1,076,000 NOK 6070 351,104 ROSE CLASSIC 632 836,000 MOT C140 244,685 ZTE CLASSIC 201 512,000 NOK 3230 235,447 SAMSUNG S229 500,500 MOT RAZR V3i 223,036 ZTE CLASSIC 204 412,000

MODEL # UNITS MODEL # UNITSNOK 6300 346,009 ZTE CLASSIC 204 722,060 NOK 5200 313,734 ZTE CLASSIC 231 575,290 NOK 1600 284,002 KINPO CLASSIC 701 472,000 NOK 6070 252,099 HUAWEI C2285 396,000 NOK 3110 219,593 ZTE CLASSIC 202 396,000

MODEL # UNITS MODEL # UNITSNOK 7610 296,460 LG 3100 2,146,400 NOK 3110 284,773 KINPO CLASSIC 703 794,000 NOK N72 282,128 KINPO CLASSIC 732 723,000 ZTE VODAFONE 225 281,960 KINPO CLASSIC 731 484,390 ZTE VODAFONE 125 245,780 KINPO CLASSIC 702 444,000

Top 5 Sub-$50 Models by CY Quarter

GSM CDMA

3Q 07GSM CDMA

1Q 07GSM CDMA

2Q 07

• 13 handset manufacturers currently active in the CDMA sub-$50 category

– Haier– Huawei– Jinpeng– Kinpo– Kyocera– LG– Motorola– Nokia– Rose Telecom– Samsung– TCL– UTStarcom*– ZTE

• Significantly greater vendor diversity in top selling CDMA models

• Over 30 handset manufacturers compete in the GSM sub-$50 category• *UTStarcomm C1122 (aka Reliance “Smarty”) not observed in

import data but known to be retailing at ~1,600INR (~$40)


Sub-$50 CDMA Handset Availability Across Global Markets

• A cursory examination of device availability in other global markets shows a general availability of multiple very low-cost CDMA models from a variety of vendors (see Table)

• The table reflects retail prices, which are not thought to be subsidized.

• Ex-Factory prices are likely to be lower due to the application of value-added tax, import duties, and markup in distribution channel

China MFG/Brand Model Price (RMB) Price (USD)Motorola W170 300 42$ Motorola W210 360 50$ Motorola W150i 320 45$ Motorola W200 300 42$ Alcatel E105C 360 50$ Dopod i101C 320 45$ Dopod i201C 350 49$ Huawei C2601 299 42$ ZTE C350 350 49$ ZTE C310 200 28$ ZTE C172+ 350 49$ Hisense C177 200 28$ (Source: www.phone.younet.com)

Mexico MFG/Brand Model Price (MXP) Price (USD)Kyocera K122 299 28$ Motorola C341 399 37$ LG MD 3000 498 46$ (Source: www.iusacell.com.mx/)

Indonesia MFG/Brand Model Price (IDR) Price (USD)Samsung X290 350000 38.19$ LG SD1100 275000 30.01$ Sky 3100 275000 30.01$ Samsung X210 275000 30.01$ Samsung X700 320000 34.92$ LG SD 1200 399000 43.54$ Samsung X580 395000 43.10$ Samsung X430 440000 48.01$ Samsung X120 275000 30.01$ Samsung X600 370000 40.37$ Samsung X460 310000 33.82$ (Source: www.ponseljakarta.com/xiklan-uno.htm)

Sample of Unsubsidized Retail Price Observations in Key CDMA Markets as of February 2008

• In the U.S., Leap Wireless (Cricket) recently launched unsubsidized Cal-Comp device (“Cricket EZ”) at $49.99 price point


Conclusion: CDMA Imports Dominate Affordable Sub-$50 Volume Categories

• CDMA dominates sub-$50 volumes– Sub-$50 GSM and CDMA ASP gap shows signs of narrowing, but unit volume disparity

remains significant

• Massive overall ASP Delta– Average price of entire portfolio of imported CDMA handsets is $72 less than GSM

• Low cost CDMA handsets have become critical drivers to mobile teledensity expansion in the Indian market

• Affordability complemented by choice: – CDMA import volumes have ramped impressively as numerous very low cost models

from multiple vendors have become mainstream

• CDMA handsets are very well positioned to continue meeting the market’s requirement for low-cost products*

*Assuming no significant departure in trending for domestically manufactured units:

india: ultra low-cost handsets, january 2007 – october 2007

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