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1. The Digital
Connected Consumer
1 6/18/2012 PA1 Confidential

2. Twenty Years Ago, someone’s Last will:
...and my position in the waiting list for a fixed
telephone connection goes to my grandson...
Today, let's compare marriage and buying a cell phone:
- commitment
Marriage: you commit for life
Cell phone: you commit for one year or two
-termination
Marriage: divorcing may cost you a fortune
Cell phone: canceling your subscription before the end of the term incurs a fee
that can reach to a few rupees
-selecting a new partner
Marriage: you can always marry another person, but you will have to pay again
for a new marriage.
Cell phone: same, you can always change your cellular service provider with
MNP

3. Agenda
 Definition: Technology, Consumers , various categories of mobile phones
 Convergence, technology and consumer behavior :
◦ Adoption influencers
◦ Drivers of mobile phones growth
◦ Various operating systems and importance
 Mobile phones market opportunity
◦ Market Sizing
◦ Regional Mobile Phones Market
◦ Regional share of market
◦ Average Selling Price
 Retail and Distribution Dynamics
◦ Channels category
◦ Distribution Progression
◦ Regional share of distribution universe
◦ Distribution Models and Structure : OEMs and Channels
◦ Roles and responsibilities of distribution stakeholders
◦ Broad margins and pricing structure
 Summary

4. Evolution of Phones
IBM and
Bellsouth
(1992,
first Smartphone)
Graham Bell(1870)
Martin Cooper
(1973, Motorola, first mobile phone)

5. Unconventional Jobs of a Mobile Phone
Compass
Mosquito
Mirror
Repellant
Jobs
Child
PC
Rattler
Games

6. Driving Mobile Phones Explosion
1G 2G 3G & Beyond
Phone Evolution
+ + + + +
Mobile Information Entertainment / Rich User Generated Computing
Communicati CE Communication Content/ Social
on Networking
+ + + + +
Computing Simple Information Entertainme Rich User Generated
Communicati nt Communicati Content/
on PC Evolution on Social Networking
 Significant increase in the computing power of wireless chipsets
 Strong feature integration  Compact, less power consuming, affordable devices
 Feature integration simplifying designs – indirectly helping the growth in
ecosystem
 Growing ecosystem driving Innovation and Competition
 Emergence of smart phone o/s such as Android helping the cause
 Improved data rates helping drive new application ecosystems
2012-11-15 6

7. TECHNOLOGY

8. It’s no longer about Mobile Phones
Key ecosystems are expanding across 4 screens
PC smartphone tablet smart TV
Mac computers iPhone iPad Apple TV
Chrome browser Android Android tablets Google TV
Windows, Office Windows Phone Windows 8 Xbox

9. We are Changing: TG 15-34
Consumer Behavior undergoing an abrupt change with
Wireless Broadband

10. Drivers to Buy a Phone
Brand Image
Enterprise
Road Warrior
Student
High
Developed
Involvement
ecosystem
Product
Gaming Buff
Music Lover
Consistent
performance
App store
or cost
prioritization Where am I?
Socially Connected What’s nearby?

11. Consumer Purchase Categories
IOCP
Individual
Owned
Company Paid
IOIP COCP
Individual Company
Owned Owned
Individual Paid Company Paid
Purchase
COCP lost sheen but gaining ground again due to customizations
required for enterprises

12. Operating Systems

13. Mobile Phones Ecosystem
•The cost to
ODMs assemble
MNCs use the handset
devices
chipsets manufacturer There are three
incurring the
manufactured for these tiers of mobile
BOM and ship device distribution
by preloaded
them to in India -from
MNCs such as Qualcomm, Infi applications is
companies that manufacturers to
Nokia, Samsun neon, Mediate in the range of super and zonal
sell these
g, SOMC, predo k, TI, STMicroel 3-4%. distributors and
devices to end
minantly ectronics, and •The preloaded finally to retailers.
customers.
employ a mix so on. mobile •The margins
Global brands offered by
of open application
also manufacturers to
standard and •Chipsets can market was
manufacture channel partners
proprietary OS account for valued at Rs. are different for
handsets on
about 30 to 40 580cr and is global brands and
their own
percent of the expected to Indian
Accesorization
total cost of a grow at a manufacturers.
for life cycle
feature phone. CAGR of 6.9
enhancement
percent

14. Categories of Mobile Phones

15. Modes of Promotions
Above the Below the Digital and
Unpaid Army
Line Line PR
Demo
Units Social
Television References
Media
PoSM
Displays Relevant
Print Wall Internet Loyalists
Glazings sites
Bloggers
Malls Word of
OOH and
Activations Mouth
Reviewers
PR
Network

16. Typical Distribution Models
Open Market
•Handset manufacturers sell devices through distributors
and then retailers.
•Handset manufacturers leverage an open market model by
having strategic partnerships and alliances with large
distributors.
•Main participants following open market model in India are
SOMC, Nokia, Samsung, HTC, LG and Indian
Manufacturers
Operator Leveraged
•Smartphones are sold through service providers and
locked for services of these providers.
•There are two methods to lock consumers to service
providers:
•Hard locking-Devices are programmed to work only for
selected operators (CDMA)
•Soft locking-The tariff package helps operators to retain
customers for a longer period of time, for instance,1GB
download free for the first 3 months(Apple and others)
Online Channel (Evolving)
• Products are advertised, sold online and door delivered to
household
• Exclusive launches possible with special offers

17. 3G Operators Embracing Devices
Evolution Operator stores
begin stocking and
Curve selling
Smartphones
Integrating 3G
Smartphones and
tablets in service Aircel stores selling
campaigns and Live with Walkman and
roadshows iPhone
Operators
entering 3G
devices space:
ODMs led
Initiated HSPA Reliance : 3G
data bundling Tab from
with Huawei
Smartphones Idea Cellular: LTE TDD
ZTE Networks
and Huawei To launch
HSPA+
Networks ODM By Q3’ 2012
launched by 6 Smartphones
operators ($100)
Vodafone Blue:
TCL ($80)

18. Industry Practice
CE and IT Mobile
Division Phones
Companies
Telecom
Key Retail Exclusive
MBOs Operators
CE Stores Chains Stores
Exclusive Key Retail Channel
IT stores Channel Chains
In-sourced Sales Outsourced Sales Officers
Officers and In Store and In Store Promoters
Promoters at top stores

19. Typical Mobile OEM Structure
Managing
Director
Regional
Sales Heads Head- Product Sales NKRC Key Operator and
Marketing Management Operations Accounts B2B Business
Business Marcom, PR, Business Trade Schemes and Account
Training Account
Managers Digital Intelligence Marketing Offers Managers
Managers
SOM
Account
ISDs
Managers
Insourced Outsourcing is the Key
Outsourced

20. Route to Market
OEM
Master Sell – in
Distributor/s Direct Billing
Entrepreneurial (Primary)
Regional Partners
(ND/MD)
Regional
Distributor Large Format Telecom Operator
Converged Stores Online Channel Exclusive Stores RKRCs
Retail Channel
(RDS)
Sell out
(Secondary)
Multi Brand Outlets Experience Zones Multi Brand Outlets
Local Online
Partners
Sell thru
(Tertiary)
Flexible and Entrepreneurial Distribution Models are
Successful

21. Types of Mobile Outlets
Multi Brand Outlets Branded Exclusive Store
Key Retail Chain Mobiles Chain Experience Store

22. Mobile Phones Distribution Progression
Mobile Phones Distribution Growth
600000
500000
400000
Counters
300000
Total
200000
Smartphones
100000
0
CY2010 CY2011 CY2012 CY2014
Year
2010 2012 2014
2011
Total Mobile Total mobile outlets Total mobile outlets
Total Mobile Outlets (250000) (500000)
Outlets(75000)
(120000) Smartphones
Smartphones Smartphones outlets Smartphones outlets
outlets (5000)
Outlets(1000) (10000) (50000)

23. Roles of Stakeholders
National Regional Retailer
Distributor Distributor
Undertakes Credit
Exposure , insurance Placement : width and
Market Exposure
extraction
Custom Clearance Placement : width of
Brand visibility and
Shrink Wrap distribution
promotion
Arranges for inland Local good transfer
In store demonstration
Transfer and billing
led sales
Local Billing Compliance to VAT and
Executing primary and
Compliance to VAT and CST Regulation
tertiary schemes and
CST Regulation Collection of Payment reconciliation
Collection of Payment DOA settlement Competitive insights
Marketing collateral Marketing collateral to and relationship
movement retailers Market sentiment
Receipt of DOA Market claims and management/
Certificate schemes maneuver
Replenishment of DOA reimbursement
Claim reimbursement

24. Interventions
In Store Demonstrators
Value Based Selling
Smartphones Training Experience Zone
Carrier Airtime Demo Phones
Recharge (RCV) In Shop Displays
250k
KRCs, Brand
Carrier Starter Stores
Packs – 150K
120k
Opportunity
Mobile
10K stores
Stores
Handset Outlets
120K
Multi Brand
Outlets
70 – 80%of Smartphones volume at MBOs, spread across geographies
Width of distribution with strong counter extraction to supplement migration of
portfolio to Smartphones
Smartphones distribution expanding with operators 3G and LTE coverage

25. The Six Dimensions
Value
Relationship
Ownership
Range
Initiatives
Service
Essentials of Engagement Rules for Success

26. Drivers of Mobile Phones Growth

27. Summary
Mobile Phones Market
 Indian mobile market is the second largest after the Chinese market and is expected
to grow at a compound annual growth rate(CAGR) of 11.8percent in terms of unit
shipment from 2011 to 2016.
 Sale of mobile handsets in rural and semirural parts of the country is expected to be
one of the major growth drivers during the next three to four years.
 Replacement is likely to help maintaining growth of the Indian mobile market, even
after it nears high level of mobile penetration.
 The Indian mobile market witnessed considerable evolution in 2010 with 3G auctions
and Mobile Number Portability : New Telecom Policy may abolish roaming and
consider India as one mobile network region
 India is now a higher replacement sales market than first mobile use market
 Lack of wire-line internet is causing mobile phones to be in everyone’s hands
 Distribution of mobile phones will keep penetrating deeper with local brands evolving

28. Summary
Smartphone Market
 The Indian Smartphone market is growing at a significant pace.
 Mobile phones have evolved from being hardware to be eco-system led
 Ecosystem defines the mobile technology that will succeed
◦ HSPA v/s CDMA
◦ LTE v/s WiMAX
 Drivers include increased need for converged devices and accelerated adoption of
Smartphone open-source operating systems
 Smartphones are expected to witness accelerated adoption when price decrease to
Rs.5,000 by early 2013. Smartphone still remains a Tier 1 brand play, aping the
western counter phenomenon a decade ago
 Western world may become retail led and India may become operator led in next 24
months
 Non traditional ways of point of sale(virtual) are evolving. Unconventional
stores(Staples, Planet M) beginning to use Smartphones as drivers of other categories
 A phone needs to talk to multiple screens and is fast becoming a tool of convenience
and productivity
 In 2010,the Smartphone market in terms of unit shipment was 3.9million, grown to
9.8million in 2011, expected to clock ~ 15million + in 2012.

29. Believe it or not