Feature phone growth outstrips smartphone sales in India for Q3

​In a bizarre twist, aggressive distribution strategies as well as mistrust of more expensive smartphones have helped feature phones stage an unlikely comeback.

India has witnessed a supernova of smartphones in the last few years. It is the biggest market for the devices and they're selling at a furious pace now that China is reaching levels of saturation.

So it comes as a shock that feature phone sales outstripped that of smartphones by a huge margin in the July to September 2015 quarter over the previous one, and was actually responsible for driving the overall growth of phones for the quarter. These comparatively underwhelming devices grew 35.3 percent to 43.53 million units, versus smartphone sales to 27.01 million, according to research outfit CMR.

"While the general belief at the moment is that smartphone is the growth catalyst for the India mobile handsets market, the results announced today reveal a contrarian view," CMR lead analyst telecom practice Faisal Kawoosa said in the Economic Times.

This is a far cry from 2013 when feature phones exhibited their first major slump in sales and continued sliding from then on. As smartphone sales took off and their penetration increased with blazing speed, from next to nothing to around 30 percent of the population, industry watchers were convinced that it was a just a matter of time before these feature phones would gently fade away.

These "dumb" phones, which are restricted to pretty much making calls and are occasionally equipped with interfaces that make them look like smartphones, don't have the ingredients that make them part of India's rapidly growing ecommerce landscape that allows people to shop or hail cabs from the country's "unicorns" -- companies like Flipkart and Uber valued at over $1 billion. And yet, here they are, apparently thriving in a market that long counted them down and out.

How has this happened? Well the plain truth is that in India, the bulk of the market yet to gravitate towards smartphones is in rural India. And these folks, perhaps with good reason, are not ready to shell out what for them are exorbitant amounts for something that they don't necessarily need right now. Average prices of smartphones at 8,857 rupees ($139) are much higher than that of feature phones at 1,338 rupees ($21).

Then there are questions about battery life and longevity. To spend a month's earnings on a phone that may see its screen cracked within a week of purchase is not exactly a winning proposition in the hinterland where tweeting and checking your Facebook page is hardly a priority. Moreover, anyone who ever owned the basic, indestructible Nokia model with the torch on top can attest to why feature phones so often trump their smarter brethren anywhere.

There is one other reason: the ferocious competitive drive of local players such as Micromax, Intex, and Lava, who are successfully propelling distribution of feature phones into the far reaches of the country where foreign players are less positioned to do.

Reaching the hundreds of millions in rural India and gaining their trust with solid feature phones is also part of a careful strategy honed by these players. After all, once 3G networks snake their way into the hinterland and price points come down a little, phone users that form India's humongous population will convert their old phones into sleek, smart ones.

And when they do, these players will be waiting eagerly to woo them with lucrative data plans that will more than make up for the small margins that they are forced to assume today.

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