“The Indian market for smartphones is quite small compared to the developed markets due to the low per capita income levels,” Sneha Shah writes for Seeking Alpha. “Smartphones currently make up less than 10% of the total mobile market, which is very low even when compared to other countries like China.”
“However, this low level of smartphone penetration means that the opportunity to grow is huge,” Shah writes. “Smartphones grew at an astounding ~75% rate in the 2nd half of 2012 according to research agency Cyber Media. Apple is making aggressive moves to capture the Indian market and has for the first time started a cashback war in India. I think this is a great move for Apple and remain positive on the stock.”
Shah writes, “Apple has already tasted success due to its changed strategy and is now the second largest smartphone seller in India in terms of revenue. Apple has continued to put pressure on its competitors by now selling its iconic iPhone with a heavy discount. Under a new scheme which is being heavily advertised, Apple is selling its older version of iPhone at Rs 7,000 discount in exchange for a customer’s old smartphone. According to dealers, Apple is incentivizing dealers by giving Rs 5000 debit note to cover up for the iPhone 4 discount. The rest of the discount is given by the dealer who makes up the difference by selling the older smartphone in India’s vibrant second hand mobile phone market. Apple is still making significant profits even after this ~25% discount as it is helping in clearing the older iPhone 4 inventory. Sales under the scheme are seeing a huge response as customers who cannot afford the iPhone 5 are flocking to buy the iPhone 4 for under $400 (iPhone 5 costs almost $900). I think this has been a very smart move by Apple. This cashback scheme is being offered by top retailers in India and has already made Samsung respond back with its own cashback scheme.”
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