Why The iPhone Has Stumbled In India

The original iPhone generated a lot of interest in India, selling well on the grey market, so it went to reason that when the 3G version launched officially in the world’s fastest growing wireless market, that it too would sell well. But apparently, that’s not what happened, with sales of the iPhone 3G falling far short of Apple’s own internal goals of moving 100,000 units by December 2009. Livemint.com reports that analysts tracking the Indian handset market estimate that half that number has been imported, with just a fraction—11,000 phones—sold so far. Given that every handset marker from the market leader Nokia (NYSE: NOK) to up and coming HTC have been anxious to capture the rapidly expanding Indian market, it seems odd that Apple (NSDQ: AAPL) hasn’t taken sales in the country more seriously.

So what hurt the iPhone 3G’s uptake in India? For one, pricing was always going to be part of it. At $800, the gadget was without a doubt, expensive, especially considering a typical IT worker’s annual salary ranges from $12,000-$24,000. But cost isn’t the entire reason. As Livemint points out, Nokia’s N96, Samsung’s Omnia and BlackBerry Bold all cost even more than the iPhone.

“Pricing communication” was a bigger reason. Indian consumers were well aware that the iPhone was selling in the US for $199, but Apple made no attempt to explain the sizable cost difference—that subsidizing handsets isn’t common practice in the Indian market as it is in the US. Even worse, the phone was locked to the carrier, despite consumers being charged full price. Apple also left too much to its operator partners—Bharti Airtel and Vodafone—which didn’t have the experience of aggressively selling handsets. They only sold the phones in their own stores, instead of branching out to the numerous retail phone outlets in India that sell 50 percent of all handsets. Marketing was another downfall. Again, it was left to Vodafone (NYSE: VOD) and Airtel, which didn’t push the phone that hard, and certainly didn’t position the iPhone as a “lifestyle” product, or make it seem “aspirational.” (Apparently, selling the iPhone as a lifestyle product could have compensated for the fact that India doesn’t yet have 3G networks, rendering the phone’s 3G capabilities useless).

Nokia, meanwhile, will be happy to learn that Apple’s strategy “was not to sell a million phones in India” and that “it only wanted to establish a presence in the country,” as Airtel’s CMO Sanjay Gupta told Livemint. Nokia dominates the Indian smartphone market, with research firm Gartner estimating they have an up to 70 percent share of it.

In a separate story, Reuters reports that India added a record 7.7 million mobile users in October to its GSM-based networks, according to the Cellular Operators’ Association of India (COAI). Total GSM mobile users at the end of October numbered 241.4 million, up 3.3 percent from 233.7 million in September. The number does not include India’s CDMA mobile users. At the end of September, number two network Reliance Communications, which is CDMA-based, had 56.1 million users.