The iPhone in India: Veni, vidi, where did it go?

Research for the previous post on mobile phones and India turned up some interesting tidbits on that much heralded icon of smart phones: Apple’s iPhone. (I expect drumrolls to sound, please)

Neelakantan’s comments reminded me of an insightful link left on his blog a week or so ago when he was musing on the imminent entry of this icon of design and usability. Yes, my tongue is firmly in cheek here but what to do, Apple has that effect on me.

So, we go from critiquing the lack of design and user experience to the other extreme, the ultimate in all of the above. Let it not be said that I take sides in the great mobile phone debate, ok, maybe Nokia’s. But that’s between me and my handset. Blather aside, lets take a look at what’s happening.

Oh horrors, sales are so sluggish they could emulate continental drift. From yesterday’s Rediff News,

Globally the 3G iPhone has sold over a million units, but the sales in India are believed to have crossed just 5,000 pieces. The picture remains unclear since Vodafone and Airtel have fallen silent after the high-decibel launch.

5000 iPhones sold in India. Dare I point out the size of the potential market, even when taking only the creme de la creme of the socioeconomic strata into account? Jeez, that’s probably the size of my extended family. Ok, I’ll quit being facetious and start getting thoughtful. Lets go back to the original analysis prior to the actual launch, terribly written though it may be, the insights are worth a read as it explains quite comprehensively the subsequent damp squib that the actual launch has been. Here’s a snippet on why the iPhone was priced as high as it is and why they couldn’t follow the subsidized handset strategy in India,

Will this kind of model work in India? Certainly, it will not.”There is no question of subsidizing the handset in India. The U.S. service providers are able to subsidize handsets because they can make up for that with their call charges. Their charge rates are like 25 cents a minute. India being a low tariff nation, the charges here are only 1.5 to 2 cents a minute,” said Manoj Kohli, CEO, Bharti Airtel recently. If service providers in India are burdened with such a handset subsidy of $350 for the iPhone, it will be a tough situation for them to successfully launch iPhone 3G, given their lower level of ARPU, which is, according to IDC India, stands at a measly $6.24 per month.
Hence, unlike AT&T in the U.S., service providers in India cannot profit from the heavy subsidy of $350. Hence, service providers in India, like Bharti, will face difficulty selling the iPhone beyond a limited high-end market existing in the country. In fact, only 17 out of 1,000 people go for high-end devices in India.

I’d say that even 17 out of every 1000 people in the high-end market would have been a significantly higher number than 5000. However, plans are afoot to drop the price by 15% as the original Rediff articles says, given the reasons,

A week after Apple began selling iPhone in India, experts believe that the iconic phone is ready to become cheaper by more than 15 per cent to boost sales in the world’s fastest-growing mobile phone market.
Apple may drop iPhone’s price by at least Rs 5,000, says Anshul Gupta, principal analyst with Gartner. “At current prices, we expect iPhone to sell primarily among those who cannot wait for Apple or the operators to cut prices,” he said. “It will be a volumes game then for the operators to clear out their stocks before Apple announces a new version of iPhone.”

Fascinatingly, in the UK, they’re going to launch the world’s first prepaid iPhone, according to The Times,

The no-commitment iPhone has arrived: a pay-as-you-go version of Apple’s popular device that frees consumers from long-term contracts with O2.

Analysts predict the UK’s first prepay version of the popular handset, which goes on sale on September 16, will be a top seller in the run-up to Christmas as consumers revolt against long contracts from mobile operators, preferring to pay upfront for the handset and stay in control of their spending.

However, the pay-as-you-go 3G iPhone does not come cheap – £349.99 for the 8-gigabyte version and £399.99 for 16 gigabytes – but does include unlimited data downloads for the first year.

Why not simply launch the same in India instead of twiddling around with price cuts? Impossible dream, the Indian mobile operators face the challenge of raising their rapidly dropping ARPU’s and obtaining and retaining new subscribers in a market characterized by heavy churn,

The success of the launch of the iPhone in India will be largely measured by the growth of subscriber base and ARPU. However, the impact on marketing costs will depend on each operator‘s strategy to build momentum and grab high ARPU subscribers while offering the iPhone. Also, since in India the value added services (VAS) market is still in burgeoning stage, and it’s contributing only about 10 percent to the service providers’ revenue, it will be a highly challenging task for service providers to draw larger subscriber base growth for iPhone 3G.

While back in the UK, the pay as you go model is seen as a herald of a prepaid economy,

People are increasingly nervous about locking themselves into long term commitments especially in the light of the current economic downturn.

“The iPhone’s long contract length and expensive monthly contract charges have deterred a vast swathe of UK subscribers from buying one – that has all changed now.”

Although, if you ask me, I’m skeptical of what options Apple thinks it has, all of these rollercoaster rumblings accompanying the launch of the latest iPhone 3G seem to imply a deeper message for the little brand that could than simply the obvious theme of price points and market size. In fact, from BusinessWeek dated Sept 2nd 2008,

What’s Hot: Used Apple iPhones
After the iPhone 3G launch, consumers want the original, hackable iPhone, and vendors are springing up to sell them—for a premium

I’ll say it again about the iPhone, business models need to be designed as much as the product for the market they are intended to operate in, taking the nuances of culture, socioeconomic development as well as the customer’s mindset into account. That is, as Neelakantan puts it so pithily in his most recent comment, “know your customer” and that’s something we know that Apple hasn’t quite managed to do yet. After all, their design success is primarily through designing for themselves.

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