Entry-level handset tags nearer to aam aadmi

Fierce competition and a fall in hardware and component prices have resulted in handset prices dropping 10-50 per cent across brands over the last 12 months.

Entry-level handsets, which have seen prices drop from an average of Rs 2,500 in 2006 to Rs 1,500 in 2007, are expected to see another 10 per cent drop as market majors Nokia, Motorola, and Sony Ericsson leverage their scale and product range to compete on price and differentiation.

Prices of components such as LCDs (liquid crystal displays), batteries, VGA camera and memory chips have dipped, as have the cost of add-on features like radio and music players, a result of competition and technological developments.

Overall, hardware costs have fallen 10-20 per cent and in some cases are expected to fall further. 
 

LESS OF A PINCH (How prices of some popular models have crashed)                                                                      (In Rs*)
	2006	2007	% decline
Sony Ericsson K750i	16,695	8900	47
Nokia N70	27,919	18,469	34
Motorola Razr	13,500	9,000	34
Sony Ericsson W550i	14,495	9,900	32
Samsung  X820	16,500	12,400	25
Motorola L7	10,000	7,650	24
Samsung X650	7,299	5,659	23
*Approx. maximum retail price (MRP)

Meanwhile, manufacturers have chosen to slash prices by up to 35 per cent, taking a hit of 10-15 per cent on bottom-lines. Most are hoping that healthy sale volumes will help them tide over the situation.

Analysts say that with the mobile subscriber base in India projected to surpass 300 million by 2010 from 166 million now, handset prices will slide further as manufacturers try to reach out to rural and semi-urban markets.

"With the increasing commoditisation of mobile handsets, it is expected that low-cost competitors will enter the market with a "me-too" strategy, keeping costs low by using network operators for distribution in mature markets and competing locally only in growth markets," predicted Romal Shetty, director, KPMG.