'On dealer or reseller levels, margins for handsets are at 10 to 20 percent.'

A business management alumnus of St Xaviers's college, Sanjoy Roy began his career as a management trainee with Bharat Commerce and Industry in 1976. With a strong inclination towards sales, he worked for companies like

Senco, Modi Xerox and Motorola. His biggest career break came with his appointment as CEO for First Mobile Group India in September 2001. Now his role is to build the company from scratch in the region, starting with the setting up of a channel network. He talks to DQCI about First Mobile's business model and plans for the Indian market, which would include IT resellers and retailers.

What are First Mobile Group's plans for India?

We are establishing our presence in India as a national sales and service company for mobile phones. We will start off with Mumbai as our main office. In the first phase, we will have offices in Delhi and Chennai before entering markets of other major cities. Within the next 18 months, we expect to increase our reach to at least 20 major Indian cities.

How big is the Indian cellular market in terms of revenues?

In terms of revenues, typically in a month, the country records about 2,00,000 plus new subscriptions. This means 2,00,000 new handsets. Now considering an average price of Rs 5,000 per handset, this is Rs 100 crore-business per month. And we are going to be a part of that business.

Why have you decided to enter India at this juncture, when the country and the overall economy is facing a

slowdown?

In contrast to a lot of businesses, which are not doing well, the Indian cellular industry has been growing constantly. Various factors have contributed to this growth. One: It has started to gain prominence only four years ago and a huge portion of the market still remains untapped.

Two: Initially, there were only two operators per circle. Then the third operator in the form of MTNL came in. And now they have issued licenses for the fourth operator in form of private players.

Ergo, every circle will have four service providers. So the moment the fourth player becomes operational by the end of this calendar year or early next year, the market will become more aggressive.

This is because if the fourth player has to get his share of the market, he will come out with some aggressive campaigns that will add to the market growth.

Mergers and consolidation as in case of Hutchison, BATATA and Bharti is another major factor. In the next 12 months all these companies are expected to go in for IPOs. When they do so, they will need to show large subscriber bases to their prospective shareholders.

They can build up this base only by ramping up the volumes in the business. Because every subscriber means one more handset sold, the more subscribers they rope in, the more business it will be for us. Therefore we want to be here while this business is on the

incline.

What business model are you adopting for India?

Internationally, we are very strongly associated with quite a few brands. We are going to be the national distributor for some select brands in India and are in the final stages of deciding which brands that we wish to sell here.

Once the brands are finalized, we will have a number of dealers and retailers to help us sell the product. By appointing these partners we will ensure that the handsets reach the consumer at an optimum price and in least possible time. We will also provide after-sales service for the handsets alongside distribution.

What will be the criteria for selecting these channel partners?

We will not have regional distributors as we are planning to have offices in the top 20 cities. After exploring the market in these cities, we will initiate business with two or three bigger dealers.

For example, in Mumbai there might be 800 dealers for handsets. Of this, logistically, a big player will emerge, who will become a wholesaler or our master dealer. Each of them will handle 100-odd dealers and that is how our distribution will work.

There is no set criteria for selection. We are seeking partners who are already in the cellular business or have a business with a similar profile. This would also include IT resellers and

retailers.

In the cellular business it has been noticed that most of the sales comes from the gray market.

What do you propose to do about this?

There is very little one can do about the gray market. This is where the government has to step in to address the issue.

Going by the past trend of other countries, in the initial stages they all had gray markets to a great extent. But as the market matures, it is noticed that the trend reverses. For example China, which had 80 percent gray sales has now got 80 percent sales coming from the legal channel. We expect the same to happen in India. So when this shift happens, we will have our channel in place and will be ready to leverage that

change.

Besides, we are distributors. So we are going to distribute at prices that the manufacturers give to us. It is the manufacturer who needs to come up with strategic pricing for the Indian market.

Strategic pricing packages should match the prices offered by the gray market. So obviously the consumer will buy from the authorized channel.

What are the margins that a dealer typically enjoys in the cellular

business?

On the dealer or reseller level, margins are very strong at 10 to 20 percent. For the distributor it could be anywhere between two to four percent. But for the distributor the economies of scale comes into play. As a dealer you sell 50 mobile phones or so in a month. On the other hand, as a distributor you sell 2000 or more per month.

What kind of alliances are you planning with service providers?

India is typically distributed into 22 telecom circles. Today there are only three or four companies which are catering to these circles, but fourth operators will soon move in. So the market is going to become highly aggressive.

Right now operators are not offering handsets as a package. And that is where we will come into picture by striking partnerships with these operators.

However it is a bit premature to talk about it at the moment, as we have yet to finalize on the brands that we will introduce in the country.

Which class of cities in India do you expect most of the business to come

from?

The cellular industry in India grew in two phases. Way back in 1995, only the metros were offering cellular services. But the rolling out started in mid-96 in the rest of the country.

What we find now is that the maturity is much more faster in the metros. But if you look at the total subscriber base additions on a month-to-month basis, the metros contribute only 38 percent. So while metros will remain our focus areas, the A-class cities will take the next priority.

In terms of percentage growth, the C and D class cities look large, because the subscriber base is small. But the absolute size will probably not be high. However, we will be there where the market is, irrespective of the classification of the cities.

VINITA SUVARNA-BHATIA In Mumbai