There’s some evidence that Apple Inc.’s strategy to increase its share of the fast-growing smart phone market in India may be working. Apple’s shipped 252,000 iPhones to India in the last quarter of 2012, three times the number in the previous three months, according to new data by Singapore-based mobile research firm Canalys. The figure was more than double from the same quarter a year earlier, the data showed. Apple launched the iPhone5 in India in November to coincide with the Hindu festival of Diwali, when consumers usually splurge on lifestyle products. At the same time, Apple changed its distribution strategy for India, aiming to get its product to a wider range of customers. Rachel Lash ford, Managing Director for mobile at Canalys, says Apple’s larger sales in India are down to brisk sales for the iPhone 5 and the decision to expand it distribution network. An official with Apple in India declined to comment. In September last year, the Cupertino, Calif.-company tied up with specialized distribution companies such as Ingram Micro Inc. and Redington India Ltd. to get its phones across to retailers. The strategy helped Apple expand into smaller Indian cities and towns. Previously, Apple used to distribute its phones in India through a partnership with mobile phone carriers like Bharti Airtel Ltd. and Aircel Ltd. This distribution model, in which the carriers bundled the phones with data services, didn’t work well for Apple in India. Despite the uptick in sales, Apple’s got a long way to go to catch up with Samsung Electronics Co. Ltd., the market leader in India. In the October-December period, Apple’s share of the 5.2 million smart phones shipped to India was only 5%, data from Canalys showed. During this period, Samsung, the market leader, commanded 40% of the smart phone market in India, Canalys says. The relatively high cost of the iPhone compared to Samsung’s products is a major reason for the gap, Ms. Lashford says. “Until Apple is able to reach lower price points, it will continue to be overtaken by competitors in India,” she said. The base price of a three-year old version of an iPhone in India is 26,500 ($493). The latest model iPhone 5 costs 45,500 rupees for the basic 16-gigabyte version. This compares with Samsung’s portfolio range in cost between $130 and $700 in the Indian market. To address the pricing concern, last month Apple started taking out advertisements in newspapers allowing customers to buy iPhones in interest-free installments. Consumers make a down payment of Rs. 16,990 and pay the remainder in six or 12 installments. “What Apple is driving in India is something similar to what is happening in the U.S.,” a person familiar with the matter told India Real Time. “In the U.S., a consumer can buy an iPhone which is bundled with a telecom service provider at $199 and pay the cost of the phone over two years,” the person said. “This is the only mechanism available for Apple to jumpstart volume in India,” said Himanshu Chakrawarti, chief executive of mobile retailer The Mobile Store Ltd., an Indian retailer. Without installments, iPhone sales will be limited to a niche segment that can afford top-end phones, he added. The installments might help boosty Apple’s sales further in the current quarter. Mr. Chakrawarti said January sales of iPhones at his company’s stores jumped three times from December. Satish Babu, founder and managing director of Chennai-based retailer UniverCell, said sales of iPhones jumped 20%-30% after it introduced the installment-plan earlier this month. Still, some analysts aren’t convinced about Apple’s new strategy. “Apple needs a good, but sub-$200 retail iPhone to grow in volumes in India’s market at Samsung’s pace,” says Neil Shah, senior analyst with U.S.-based research firm Strategy Analytics. To supplement its distribution strategy, Apple has also been increasing its headcount in India, with staff numbers jumping over 30% from six months ago to nearly...
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