New Delhi, Nov 7: Software engineer Samee Alam was ready to take the big leap and buy an iPhone in this week’s Diwali festival sales, but at the last minute he opted for cheaper Chinese competitor OnePlus instead.
Alam, 27, spends hours on his phone watching shows, surfing and shopping, making him the perfect target for Apple Inc as it strives to raise sales among India’s 1.3 billion consumers.
But in a country where the average per capita income is around $2,000 a year, even the cheapest of this year’s new iPhones, the XR at 76,900 rupees ($1,058), costs twice as much as many of the alternatives.
Hong Kong-based Counterpoint Research says that iPhone sales are falling as a result. From three million phones in 2017, sales may sink to two million this year, according to their estimate, the first decline in four years.
More than half of those sales will come from cheaper older models, and the lack of progress in India was among problems cited by Chief Executive Officer Tim Cook when he gave a disappointing holiday outlook last week.
Even in the premium segment, smartphones that cost more than $400, Apple lagged Samsung and China’s OnePlus in the third quarter.
“I have never used an iPhone and I was keen on getting my hands on one but it didn’t make sense,” says Alam, who works for one of the raft of firms to have invested in the southern city of Bengaluru, often called India’s Silicon Valley.
“I look for storage, camera and processor in phones and cheaper alternatives like OnePlus are more value for the money.
The new iPhones cost almost 100,000 rupees – I can get three good phones for that price or even a decent gaming laptop.” Solid Mac sales and the high unit price of iPhones meant Apple’s total revenue of $2 billion in India last year was still double that of OnePlus, which only sells mobile phones. But Counterpoint’s data says that gap will also shrink.
OnePlus’ India head Vikas Agarwal told Reuters this week that 10-15 percent of new customers in recent months have been defectors from Apple, suggesting even some loyalists are opting out of upgrading their handsets.
Apple’s problems go beyond price.
The company, facing down a handful of regulatory headaches, lost some of its top executives in India at the start of this year.
An Apple spokesman said the departures had nothing to do with the company’s performance, but people familiar with the matter told Reuters that the departures were likely linked to the company changing its distribution system. Apple has cut the number of distributors in the country to two from five.
The sources, who declined to be identified because they have business relationships with Apple, also said company veteran Michel Columb is still working on solidifying business relations since taking control of the Indian operation in December.
Apple declined to comment further.
Prime Minister Narendra Modi’s government has sought to drive electronics producers into manufacturing locally by steadily moving tariffs up the supply chain from simple phone cases to sophisticated chipsets and boards.
Along with local firms like Lava, global smartphone giants including Samsung Electronics Co Ltd, Oppo and Xiaomi Corp have responded aggressively, investing millions of dollars in plants around Bengaluru and Delhi tech hub Noida.
Apple is the only major player which does not manufacture phones in the country and it only assembles two low-cost older models through Wistron Corp in Bengaluru.
Industry experts say as a result the company still imports about 70-80 percent of its phones. That results in high import duties, which in turn make the phones expensive.
In the United States, the basic iPhone XR model costs $749 or roughly 54,400 rupees, only two thirds of its retail price in India. Beyond that, while U.S. phones are subsidized under deals with wireless carriers, Apple’s phones in India are not.
“Apple doesn’t have enough confidence … in the Indian manufacturing system right now, to set up plants and move some of the manufacturing out of China,” said analyst Navkendar Singh of tech consulting firm IDC.
“In the process they are losing around 15-20 percent of their tax incentive … which they could have passed on to the consumer.”
Diwali, the Festival of Lights, is peak selling time for electronics in India, but the Apple-licensed store in one of Bengaluru’s big shopping malls was deserted this past Saturday.
“Features of the emerging phones are very similar to an iPhone,” says salesman Aejaz Ahmed, adding volumes have fallen in the past few months. “It is very difficult to make out the difference from a distance because they even look so alike.” Sales staff at several stores in Bengaluru and nearby Chennai pointed to the launch this year of the latest OnePlus phone as a major problem for the U.S. phonemaker. At 37,999 rupees, the Chinese company’s 6T is half the price of the XR.
The result, says Neil Shah, from Counterpoint, is that Apple’s user base in India is set to decline about 10 percent to nine million users this year. That compares to an estimated 436 million Android users.
“If your user base is declining, you are losing grip on the market,” he says. “The new customer base is not coming.” (Reuters)
Centre to snub RBI gov, empower board
New Delhi: In a move that could further widen the rift between the RBI and itself, the Narendra Modi government has proposed changing rules to allow closer supervision of central bank functions by its board.
The government has recommended that “the board of the Reserve Bank of India (RBI) draft regulations to enable setting up of panels to oversee functions including financial stability, monetary policy transmission and foreign exchange management”, said a foreign news agency on Friday quoting sources.
The move is meant to empower the regulator’s board, which includes government nominees, and give it a supervisory role.
The recommendations being considered include setting up several committees comprising two to three board members each. The body has the powers to frame rules under Section 58 of the Reserve Bank of India Act, 1934 and no legislative change is required.
The RBI’s board regularly advises and guides the regulator, leaving the decision-making to the governor and his colleagues.
However, Swaminathan Gurumurthy, a chartered accountant who was nominated by the government to the board, and government nominees Subhash Chandra Garg and Rajiv Kumar have been vocal about perceived shortcomings in banking supervision, flow of credit to industry and easier financial conditions to overcome a crisis in its NBFC sector.
The RBI board is scheduled to meet on Monday to consider contentious iss-ues including easing rules governing transfer of surplus funds to the government, liberalising norms for weak banks to boost lending.
It will also review rules on capital and risk weight for Indian banks which are considered more stringent than the Basel guidelines. Other proposals on the agenda include restr-ucturing of loans upto $3.5 million availed by micro, small and medium enterprises.
Former RBI governor Raghuram Rajan had recently said that board’s role historically has not been to take “operational decisions” but to focus on broader strategy as well as ensure good governance. He had said that RBI board during his tenure rarely tried to put themselves in the position of the professionals.
“So, they (board) are there to ensure that the government’s money is well spent in the RBI and also to serve as a sounding board which is why we have people from different walks of society, very eminent people,” he had said. “So, my sense is the objective of the board is to protect the institution, not to serve others’ interest,” Dr Rajan had said.
All telcos, except Jio, fail Trai’s call drop test on select highway, rail routes
New Delhi: All telecom operators, except Reliance Jio, failed to meet call drop benchmark in drive test conducted by sector regulator Trai on different highway and rail routes, says a report.
According to a Trai report published on Thursday, while network performance of telcos differed on highways, none of them, except RJio, could meet call drop benchmark on the three rail routes covered under the test.
“Only RJio is meeting quality of service benchmark of drop call rate …,” the report said.
According to the quality of service rules, not more than 2 per cent of total calls in a telecom circle on a network should automatically get disconnected.
The highways between Asansol to Gaya, Digha to Asansol, Gaya to Danapur, Bengaluru to Murdeshwar, Raipur to Jagdalpur, Dehradun to Nainital, Mount Abu to Jaipur and Sri Nagar to Leh were covered in the test. Railway routes between Allahabad to Gorakhpur, Delhi to Mumbai and Jabalpur to Singrauli were covered.
Either 3G or 2G network of Bharti Airtel, Vodafone Idea and state-run BSNL failed to meet call drop benchmark on four highway routes and all the three rail routes. Trai also named Tata Teleservices Ltd (TTL) network for not complying with service quality norms on select highways.
The report found that TTL, which is in the process of merging mobile business with Airtel, failed to even complete call connection as per benchmark betwen Bengaluru to Murdeshwar, Dehradun to Nainital and Gaya to Danapur and on the three rail routes.
Airtel could not meet call connection rate or call setup success rate (CSSR) on Gaya to Danapur highway and the three rail routes. Vodafone Idea network could not meet CSSR rate on Raipur to Jagdalpur highway and all the three rail routes.
Trai has mentioned Vodafone and Idea separately in the result as some tests were conducted before completion of their merger. Both the companies completed their merger on August 31 and now operate as Vodafone Idea Ltd.
No proposal yet for Jet airways takeover: Tatas
Mumbai : The Tata group said there have been preliminary discussions on the acquisition of struggling Jet Airways but it has not made any formal proposal for buying out the 51 per cent stake held by the Naresh Goyal family in the airline which has accumulated losses of over Rs 12,000 crore till the September 2018 quarter.
While the board of Tata Sons, the holding company of the group, discussed the acquisition of the airline, sources said both the parties are going slow as the broad contours of the deal, especially on the continuance of Goyal on Jet board after the takeover and other issues, have not been thrashed out.
Indicating that they are moving cautiously, Tata Sons issued a statement after the board meet, saying, “Over the last few days there has been growing speculation in the print and electronic media about Tata’s interest in Jet Airways. We would like to clarify that any such discussions have been preliminary. No proposal has been made.”
Jet Airways said in a stock exchange filing, “Reports (on merger of Vistara with Jet) is purely speculative in nature and that there are no discussions or decisions by the Board, which would require a disclosure.”
Sources said Tata Sons Chairman N Chandrasekaran had a preliminary discussion and an understanding over the broad contours of the deal with Jet Airways promoter Naresh Goyal for a possible share swap agreement between the Tata and its foreign joint venture partner Singapore International Airlines, Vistara, and also exit of Abu Dhabi based carrier Etihad that holds 24 per cent in Jet Airways.
Sources aware of the talks said that Tatas would definitely want a non-compete clause that bars Goyal and family from entering aviation business for a substantial period of time. However, sources say Goyal might have reservations over exiting the airline that he has created over 25 years and made it as a formidable brand in full service space and agree to a non-compete clause and complete exit.
The Tatas are looking at dilution of Goyal’s shareholding which is currently 51 per cent. A possible preferential allotment of shares might be looked at triggering an open offer as cash strapped Jet needs equity infusion on an immediate basis. “Liquidity continues to be worrisome, and Jet Airways earnings are most levered to oil prices and rupee depreciation. A potential entry of a strategic buyer would address the current liquidity crunch. Jet’s liquidity concerns are unlikely to dissuade a well-capitalised group like Tata, which has a track record of mega acquisitions. A prospective deal may involve a notable control premium,” said a report by Edelweiss equity research.
However, Jet Airways acquisition will not come cheap for the Tatas as the airline has accumulated losses of Rs 10,772 crore till FY18 with another reported loss of Rs 2,620.46 crore till the first half of FY18/19. Its other liabilities stack up to a staggering Rs 11,000 crore. It has immediate vendor payments that are stretched and lease rentals that are due. The airline has 16,000 employees .
Aviation analysts say it is the immediate scale that an acquisition of Jet Airways by Tatas will give to a fledgling Vistara that the Tatas are eyeing along with slots, that are at a premium for expanding Indian carriers as most of the metro airports are slot constrained restricting expansion of the airlines. “It is a billion dollar deal for the Tatas,” said an investment banker who has background in cutting out aviation deals in the Indian aviation market. Tatas have already accumulated losses of Rs 2,100 crore on account of both its airlines — Vistara and budget carrier AirAsia. It might not have the appetite to take over huge losses of Jet.
“It is all in the structuring of the deal. There are a lot of complications and also regulatory compliance issues in a deal such as Tata-Jet Airways. It will take time for the final proposal to be put on table,” said a person familiar with the ongoing discussions.
Jet’s share closed at Rs 346.85, up 8 per cent from its previous close of Thursday. The stock continued its four day rally, soaring 43.3 per cent over the past four days on the deal buzz with Tatas.
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