Tuesday, June 16, 2009

iPhone in India

This post highlighted why the price of iPhone will not come down. In comments to the post I argued that in US, though law enforcement is better, service providers rely on the fact that cell phones are locked. This model has not been explored in India i.e. locking the cell phone to the provider. Here’s a thought, cut the price down to 10,000 to 15,000 and have a 2 yr contract with 1,000 to 1,500 monthly fee (data and 500 free minutes included). As long as the customer service is not horrible I am sure people will go out of their way to jail-break the phone.

The author later pointed out that iPhone is locked in India and people have managed to crack it. This got me thinking, can a cheaper locked phone work in India? I think it can.

I believe that locking the phone is not enough, the locked phone should provide a compelling value so that users do not crack it. If all you provide with iPhone (or any other smart phone like Nokia N97) is basic voice services then users are not tied to network but would try to get phone and move to another network where they can get a better deal. However, if you provide voice plan with a competetive data plan then you start creating value. Add to that the fact that when you crack a phone you lose warranty and run the risk of ruining it. Moreover, if you crack a phone you are locked out of the apps (apple has 50K, Nokia has started the service too) and you do not get s/w updates. All this discourages jail-breaking your phone.

How many people will actually crack an iphone if Airtel/Vodafone starts selling it for say Rs 10K. I don't know whether any studies have been done on this or whether the phone companies even have the data. Let me assume the worst, now to the next important question, how can companies minimize their losses if they do introduce a scheme like that.

One way to minimize losses will be to look at the existing users and reward loyal users. Start with post-paid users instead of pre-paid. Though, I know of people who are on pre-paid but have been with the same provider for over 5 years, I think targetting postpaid is better as those subscribers have already shown that their willingness to commit. Additionally, target customers who are spending more than certain amount (say Rs 800). Now create plans that will add value to this segment (say Rs 1200 with unlimited data). I believe this strategy has chance to succeed. Even if it fails (i.e. people take the phone and crack it) the cell phone providers will have hard data on how many people actually crack their phones. That data can be useful in deciding how much discount to give on the phone i.e. if a lot of people are cracking the phone price it closer to the current price, but if not many are cracking their phones then lower the price.

With number portability in the near future and growth likely to slow in a couple of years, service providers need to look at ways to lock their existing customers. Providing discounted phones, with a competitive plan is a way to not only retain their subscribers but also to boost ARPU's.

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