The iPhone Gains Ground in India

Expanded distribution and marketing pays off.

Evan Niu
Evan Niu, CFA
Feb 9, 2013 at 6:00PM
Technology and Telecom

Apple's (NASDAQ:AAPL) always had a tough time gaining ground in the Indian smartphone market. One of the more important hurdles to the iPhone in the country is that local carriers don't subsidize smartphone purchases, and unsubsidized iPhones are rather expensive.

However, the Mac maker was reportedly preparing to expand its distribution network by partnering with several third-party resellers in India to reach smaller towns. Because of complex local regulations, Apple doesn't operate any of its own retail stores in the region. According to a recent report from The Times of India, Apple is now making some progress.

Apple has quickly ramped up advertising and marketing to build its brand presence. The company has also reportedly increased its employee count in its Apple India subsidiary from 30 people to approximately 150 over the past six months. Convergence Catalyst partner Jayanth Kolla was quoted as saying that Apple is replicating what it did in China several years ago. "They studied the market, learned consumer needs, and suddenly went aggressive."

According to IDC's estimates, iPhone shipments over the past three months have jumped by 3 to 4 times, in part because of the aforementioned distribution expansion. The partnership with distributor Redington has already started paying dividends for both companies.

One thing to keep in mind is that Apple's unit shipments in India are estimated to be very small, so growth off such a small base may be less impressive in reality. The iPhone 5 launch allotment in India was supposedly just 10,000 to 15,000 units -- hardly noticeable within consolidated results.

India is included in Apple's "rest of Asia Pacific" segment, which was just 7% of sales last quarter. Apple has previously said that Brazil is next on its BRIC priority list, but pursuing growth in India can't be too far off.