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January 2015 Cover Story

Published on: 2015-01-22 00:00:00     908 times read    0  Comments
Ushering Nepal In The Smarter Age
With the growing tech-savvy population, Nepal's gadget market now has the presence of almost all global and regional smartphone brands. Despite being a small market, Nepal is getting more lucrative to them as the demand for smartphones is on a sharp rise. The demand fuelled by rise in per capita income, falling handset prices and users' ever increasing attraction towards newer technology has led more and more Nepalis into switching from feature phones to smartphones in the recent years. 
 
-By Sanjeev Sharma/Bishwas Regmi
 
The popularity of smartphones in Nepal has been soaring over the years following the influx of almost all major global brands into the local market. The Nepali corporate world in particular has been witnessing the growing use of smart communication devices in recent times.  Take for example, Anil Shah, the CEO of Mega Bank, who is an avid user of smartphones. “Smartphones have become an integral part of my life,” says Shah who owns a Iphone 6 Plus, a Samsung Galaxy Note 3 and a Tag Heuer luxury smartphone. According to him, the use of smartphones has expanded beyond calling and text-messaging. “I use my smartphones for tasks including social media integration, documentation, setting up appointment notifications and photography,” Shah notes. 
 
Bishwas Dhakal, the CEO of F1 Soft, shares similar views. Dhakal who uses a Samsung Galaxy Note 3 finds his smartphone helping him perform various tasks. “The phone’s large screen makes emailing, texting and other operations easier. It connects me to the Internet wherever I go,” he mentions.  Binayak Shah, Managing Director of The Airport Hotel, also share his experiences with his Iphone 4S. “I am used to it,” says Shah, “This easy-to-use smartphone keeps me connected all the time.”
 
 
While smartphones serve various professional and personal needs of corporate honchos, a large section of mobile phone users has switched to smartphones from feature phones. The Nepali smartphone market which has been witnessing a staggering growth in recent times is likely to rise further in the coming years as more and more users are choosing smartphones over the ‘not so smart’ phones. According to Purushottam Basnet, former President of the Mobile Association of Nepal (MAN), about 1,50,000 units of smartphones are sold in the country’s mobile market on a monthly basis. “Annually 1.8 million smartphones worth Rs 8-9 billion are sold in Nepal,” claims Basnet, “The sales growth rate has reached 25 per cent with the market share of smartphones crossing 30 per cent of the overall mobile market.” Though specific data on smartphone import is not available, government statistics indicate a fast rising demand of smartphones in the local market. Nepal imported 2.16 million units of mobile handsets worth Rs 5.98 billion in FY 2012/13. The import rose to 3.12 million units worth Rs 9.90 billion in FY 2013/14, according to the data published by the Trade and Export Promotion Center (TEPC). 
 
Reasons Behind the Rise
Why are more and more Nepalis buying smartphones? "The reason varies from individual to individual. Some buy it to take pictures, others to play games, and yet others for their security. Some people simply want to carry the best phone which has everything in it," observes Dikesh Malhotra, President of Integrated Mobility Solutions (IMS), the authorised distributor of Samsung smartphones in Nepal. 
 
Innovative technologies, easy Internet connectivity, falling prices along with style and fashion could be some of the major reasons behind the growing popularity of smartphones in Nepal. As the young generation is always keen about new technologies, Nepali youngsters have been swift to adopt smartphones. Making phone calls, texting, Internet surfing, downloading, gaming, watching high quality streaming videos, listening to finest quality music, and taking photos, 'selfies' , videos and instantly uploading/sharing them along with using different lifestyle related apps would not have been so easy without smartphones. In Nepal, people of the age group 15-40 are smartphone owners. Most of them are city dwellers. 
 
telephone penetrationThe introduction of GPRS and 3G services in the GSM mobile network in 2007 was a milestone development which persuaded Nepali mobile phone users to switch to smartphones. The mobile devices with touchscreen displays and various kinds of connectivity allowed them to connect to the World Wide Web easily. The social media, for instance, has seen its user-base expand by multifold in Nepal over the past few years, thanks to the availability of smartphones equipped with integrated support for social networking sites. The data published by Facebook shows that the number of its users in Nepal increased to more than 4 million in 2014 from 0.85 million in 2011. According to Facebook, 2.02 million Nepalis were found accessing the world's most popular social network through smartphones. Meanwhile, only 1.3 million users accessed the website from feature phones. 
 
The surging rate of mobile Internet subscribers also gives a glimpse of this rising trend. The latest MIS report released by Nepal Telecom Authority (NTA) reveals that the total number of GPRS, EDGE and WCDMA subscribers reached 8.89 million by mid-September, 2014.  Similarly, the mobile Internet penetration rate also peaked to 95.14 per cent of the total Internet subscribers during the period. A recent survey conducted among Opera Mini users in Nepal reveals that for 35 per cent of the users, their mobile phone is the only way of getting online. The popular mobile Internet browser also revealed that 50 per cent users browse the Internet from their handsets for more than an hour every day.
 
 
The increase in per capita expenditure coupled with falling prices of handsets has fuelled the shift from feature phones to smartphones. “The income level of Nepalis has been rising. This has led to the increasing sales of smartphones,” says Bhupal Chhetri, Sales and Marketing Manager at Pashupati Trade Link, the authrorised distributor of Micromax mobiles in Nepal. Falling price is another reason enabling Nepali users to buy smartphones. The price of almost all handsets usually goes down in the months following its launch in the local market. This allows more buyers to purchase high-priced smartphones at cheaper prices. 
 
Mobile devices have become the new statement of style and fashion among the Nepali youths. The devices they carry not only help them to meet their communication needs but also assist them to maintain their social status. According to a recent study by MAN, an average Nepali user changes three smartphone handsets in one year. With 'pocketable computers' in their hands, Nepali users are fulfilling their computing needs with extra dose of style and technology. 
 
 
Smartphone Segments
As the domestic market has been swarmed with a vast array of handsets, prospective buyers are able to choose smartphones from different segments, with their prices ranging from Rs 4,000 to Rs 120,000. On the basis of current price levels, smartpones ranging from Rs 4,000- Rs 19,000 are placed in the entry level or low-end category, whereas those with a price range of Rs 20,000-Rs 39,000 are put in mid-end segment and the handsets over the price of Rs 40,000 are categorised as high-end or premium devices, traders say.
 
 The entry level smartphones come with basic features, functions, and minimalistic design along with limited hardware and software capabilities. To name a few, Samsung Galaxy Ace , Galaxy Y , Galaxy Star , Colors Xfactor Idol, Xfactor Wave, Xfactor Quad 2, Micromax Bolt A69, Nokia Lumia 530, Lava Iris X1, Karbonn Titanium S1 Plus are popular among Nepali budget buyers. However, as the demand for entry level smartphones is rising, vendors are coming up with low-priced but quality handsets. The domestic market, for example, is set to hit by Android One Series, namely, Karbonn Sparkle V, Micromax Canvas A1 and Spice Dream Uno within few weeks. Targeted at the first-time buyers of smartphones in developing countries, the low-priced but feature-packed Android One handsets- produced under the guidance and support of Android OS developer, Google- have already been received warmly in India. According to Google's Asia-Pacific blog, the entry-level smartphones will be launched in Nepal, Bangladesh and Sri Lanka in the upcoming weeks. 
 
 Meanwhile, the mid-range handsets offer improved hardware functions and software features, faster Internet capabilities, various connectivity options, bigger screens, higher resolution displays, better camera functions and expanded storage and memory systems. Samsung Galaxy Grand II and S4 Mini, Colors K22 Octa and K1 Amoled, Gionee Elife S5.1, LG G2 Mini, Huawei Honor 3c, Nokia Lumia 720, Nexus 5, Sony Xperia SP, Micromax Canvas Nitro and Karbonn Octane Plus are currently considered as some of the bestselling mid-range smartphones in Nepal. Due to their affordable prices and satisfactory performance, mid-range handsets have quickly gained popularity among Nepalis. "Bar phone users normally don't opt for costly phones during first purchase. They opt for mid-segment handsets and once they are comfortable with them, they switch to higher price ones," opines Sanjay Agrawal, CEO of TeleTalk, the authorised distributor of Colors and Gionee smartphones in Nepal. 
 
 The high-end or flagship smartphones, in the meantime, host premium functionalities and features such as fast processing speeds, superior imaging systems, sufficient power backup, ample sizes of RAM and ROM, high resolution displays with top-end protection, powerful graphics systems, attractive design with ultimate build quality, fast Internet, latest connectivity options, fine quality audio, varieties of preloaded apps, latest operating systems and manufacturer's support for a significant period. Presently, Samsung Galaxy Note 4 and Galaxy S5, Apple Iphone 6 and 6 Plus, Gionee Elife S5.5, Huawei Ascend Mate 7, Sony Xperia Z3, LG G3 and Nokia Lumia 930 are some of the notable top-tier smartphones in the Nepali market. Users looking for high-performance devices and those who want to show their flashy lifestyle are usually the purchasers of such smartphones. "High-end handsets are targeted at the corporate people who use their smartphones in their work as well," says Ramesh Shrestha, SBU-Head of Mobile Communication at CG Electronics, the distributor of LG, Lava, Xolo and Intex brands of smartphones in Nepal. 
 
 
Screen Size Matters
The screen size of smartphones also plays a vital role in today's market. "People who like to have everything in a smaller screen size chose the Galaxy S series and people who like something big with an addition of S pen choose the Galaxy Note series," says IMS President Malhotra. 
 
Usually, handsets with screen size ranging from 3-5.2 inches are known as smartphones while those having displays between 5.3-6.9 inches are called phablets. According to distributors, different groups of customers prefer different screen sizes. Ramesh Shrestha of CG Electronics says, "Smartphones with 4-5 inch screens are primarily targeted at teenagers and students. They want a lot of features in a phone and they also look at the affordability factor. They change their smartphones frequently as they find it easier to purchase new phones than to upgrade the old ones." 
 
In recent years, Nepali users are also seen attracted towards phablets. A relatively new terminology in tech world, the word ‘phablet’ got mainstream popularity after the launch of Samsung Galaxy Note in 2011. Phablets are big-screen smartphones and their screen size is between 5.3-6.9 inches. In other words, they are bigger than typical smartphone and smaller than a tablet computer but have the combined functions of both types of devices. These large screen phones come with premium hardware specifications and software features. Phablets such as Samsung Galaxy Note 4, I phone 6 Plus, Huwawei Ascend Mate 7, LG G3, Nokia Lumia 1520 and Sony Xperia Z3 Ultra are favoured by Nepali users.
 
Market Share and Competition
As the domestic market continues to grow, Nepal is not left untouched by the fierce competition that has engulfed the international gadget arena. Samsung, Colors, Micromax, Karbonn, Huawei, Sony, Nokia and LG are considered the major contesting brands in Nepal. Apple which also has a significant presence in the country, though unofficially, is expected to rise in Nepali market after starting the authorised sales of its smartphones in December. Newcomers such as India's Videocon and China's Xiaomi have also entered the market race. 
 
No survey has been conducted about the market share of various smartphone brands. Nevertheless, Samsung is said to be holding the largest market share."Our market share in the smartphone category is about 75 per cent," claims IMS President Malhotra, adding, "Compared to 2013, we grew by 51 per cent in Nepal in 2014." Similarly, the two Indian smartphone majors, Micromax and Karbonn currently hold a market share of 18 and 10 per cent, respectively. Likewise, the home-grown brand Colors comes second with a market share of 15 per cent, according to Gaurav Hamal, Manager of Marketing at TeleTalk's Color's division. This discrepancy in market share claims made by various smartphone brands is due to the lack of authorised surveys.  
 
The highly competitive market has led vendors to come up with various marketing strategies to lure the customers. Mainly, after the launch of flagship handsets, distributors are seen announcing offers such as easy installment payment schemes with zero per cent interest, cash discounts, free goodies and services including free data packages. Similarly, occasions like New Year, Dashain and Tihar galore with varieties of market offerings. The market, for instance, has seen numerous Christmas and New Year schemes lately. 
 
The competition to grab a slice of the market has ultimately resulted in price fall with all major brands slashing their handset prices. Vendors are benefiting from this decline as they can sell more products at prices affordable for buyers. "This has affected us in a positive way as we have always tried to be very competitive in the market and make long-term strategies. Our sales have gone up with lower prices because the demand for Samsung smartphones has increased in Nepal," opines IMS President Malhotra. TeleTalk CEO Agrawal also echoed the same," We are not at all affected by the fall in prices. Despite the slow market, we are having 5 to 7 per cent of sales growth annually." However, concerns regarding the possibility of a 'price war' have also been expressed as analysts are wary of unhealthy competition.  
 
Smartphone brands are also gearing themselves up for delivering quality products and services to satisfy their customers. One such example is opening of exclusive experience zones, where prospective buyers can spend long time to operate and feel handsets to get the taste of the latest technology before buying available products. Samsung Smartphone Cafés and Huwawei Experience Zones have already resumed their operations in major cities around the country while other brands have also stepped up efforts to open exclusive outlets. "We have planned to open 100 Model outlets throughout the country," shares Gaurav Hamal of TeleTalk.  
 
Similarly, multi brand outlets are also opening for business where customers can choose smartphones of different brands under one roof. "We are focusing more on customer satisfaction, product quality and pricing policy along with customer-centered promotion and marketing strategies to penetrate the market," says Manish Rajbhandari, Managing Director of Allied Trade Link, the authorised distributor of Karbonn and Panasonic smartphones in Nepal. In October 2014, the company opened its first multi-brand outlet at Kantipath, Kathmandu.  
 
The Android Domination
Nepali smartphone market has increasingly become Android-centric over the years. Though no official data regarding the use of the operating systems for mobile devices in Nepal is available, traders say that a majority of handsets sold are equipped with Android OS. According to them, seven out of ten handsets sold in Nepal are Android smartphones while IOS and Windows Phone OS account for the remaining market.  "Buyers demand the devices which come with the latest version of Android OS," says a trader. Launched by US Internet giant Google in 2007, the OS currently holds the largest market share among mobile operating systems with 83.6 per cent globally. Its competitors IOS and Windows Phone OS, meanwhile, have global market shares of 12.3 and 3.3 per cent, respectively. 
 
The Linux-based open source OS, which allows the use of multiple applications, is hugely popular due to its user-friendly functions, compatibility and customization options with users as well as phone manufacturers and app developers. The Android's Google play store hosts more than 1.3 million apps as of August 2014 while the Apple Store (IOS) has 1.3 million apps available (as of September 2014) followed by Microsoft's Windows Phone Store with 340,000 apps (as of November 2014).
The Grey Chapter
 
Despite the brisk business in authorised sales, unauthorised or grey trading has been an issue of major concern in the Nepali smartphone market which has been significantly infiltrated by handsets coming through various unauthorised channels.  It is said that smuggled handsets cover 30-35 per cent of the demand of cellular phones in Nepal. A majority of grey smartphones are smuggled into the local market through the unchecked routes of open border between Nepal and India, traders say. Similarly, the illegal import is also carried out through the air route. According to traders, large quantities of illegal handsets also make their way to Nepal via air route which are sent by agents based in South East Asian markets such as Malaysia, Thailand and Hong Kong. 
 
Customs rules in Nepal allow each incoming air passenger to carry one mobile handset provided that it is not seal packed. However, this rule is breached as air travelers arriving in the country carry more than two seal packed mobile phones and that gets unnoticed by custom officials. The handsets generally end up in the local market.  Similarly, cheap clones of branded mobile sets- mainly those coming from China- have also been eroding the Nepali smartphone market.
 
The government has implemented type approval certification (TAC) to tackle illegal import of cellular phones. Made mandatory since 2008, importers need to obtain TAC from the Nepal Telecom Authority (NTA) for importing any handset model. This provision which is as per the Telecommunication Act 1997, allows import of mobile phones which meet the technical, regulatory and safety requirements set by NTA. Nevertheless, TAC has failed to stop the illegal import as unchecked unauthorised selling of brands that have authorised distribution can be seen. Likewise, smartphones of various brands including Motorola, HTC and OnePlus One- which currently do not have authorised distribution in Nepal- are easily available in the domestic market. This has not only added to the problems of the authorised sellers who are already facing difficulties due to the stiff competition but also caused revenue loss to the government. This loss, according to industry insiders, could be in billions of rupees.  
 
Traders blame the ineffectiveness of government policies for this. "Required policies are already in place. But their effective implementation is missing. Today you can get TAC for any kind of phone by just submitting certain documents. The government is giving approval without using proper criteria," remarks Aashish Jindal, Director of Paramount Electronics, the distributor of Nokia smartphones in Nepal. Distributors suggest to the regulatory authority to become stricter on this issue. Ramesh Shrestha of CG Electronics says, "The type approval list should be more specific and strict in checking documents presented by applicants along with conducting proper periodic monitoring for quality."  
 
The government, after long dilly-dallying, has stepped up efforts for standardization of mobile phones. In the budget for FY 2014/15, the government has announced additional measures to curb the illegal import. "In order to discourage the illegal import and use of mobile set and to set a standard of mobile (type approval), an operational manual will be formulated and implemented for making Equipment Identity Register System more effective." states the budget. There also have been calls for establishing a South Asian regional framework to control the imports and sales of unauthorised handsets. The 13th meeting of the South Asian Telecommunication Regulator's Council (SATRC) held in April 2012 in Kathmandu adopted a proposal on regional collaboration to ensure entry of quality handsets in the markets. The proposal titled “Ensuring Quality Mobile Handsets in SATRC Countries” further recommends, "In addition, mobile theft is also increasing day by day in the region. By establishing regional Equipment Identity Register, handsets which are stolen can be rendered useless. Hence, customers will be lured to buy type approved handsets in the region."  

 


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