Will Apple’s big bet on India also mean cheaper iPhones?

Apple CEO Tim Cook made a number of significant announcements during his visit to India, which could prove to be game-changers for the iconic brand. But the one thing most Apple fans in India want to know is whether Cook has plans to make iPhones and iPads more affordable.

Though Cook did not spell out his game-plan on this, there are clearly three big initiatives that Apple is pushing in India, which could double its sales in the next one year, analysts say. These include selling certified pre-owned iPhones, partnerships with telecom operators and a leasing programme that would allow consumers to simply rent out Apple devices. Apple runs these programmes in most other markets and gets a chunk of its sales through them.

“There is a lot of pent-up demand for iPhone in India. We’ve seen iPhone sales shooting up when Apple made available iPhone 5s, along with 6 and 6s, with prices starting at 22k. This shows people are willing to buy even 2-3 year old iPhones in India. If Apple is able to reduce prices further by bringing in certified pre-owned phones, its market share will grow tremendously,” said Jayanth Kolla, partner and founder of telecom research firm Convergence Catalyst.

Currently, Apple’s market share in India is in the low single-digits. The smartphone market is dominated by Android-based devices that are available at less than ₹5,000. Though Apple will never compete in the low-end or even the middle category, the brand’s value is so high that it could get a bigger consumer base even if the devices are available at under ₹30,000.

“Apple is already very strong in the above ₹30,000 smartphone market, where it is neck and neck with Samsung. If the company is able to get a phone at the ₹15,000-30,000 price point, iPhone sales can double in India to four million units in just one year,” said Faisal Kawoosa, Lead Analyst at research firm CMR.

“The ₹15,000-30,000 segment is about 5.6 per cent of the smartphone market in India. With high aspiration value attached to Apple in India, if the company is able to bring in phones in that price bracket, it can easily capture over 40 per cent share in the segment,” Kawoosa added.

While Apple’s iPhone sales globally have slowed down, due to sluggish uptake in the US and China, it grew 56 per cent in India during the last quarter. Cook, in no uncertain terms, said he recognised the potential here.

The company has asked the Centre to allow it to sell pre-owned phones, which is not the same as refurbished phones. Pre-owned phones come with a one-year warranty and service support from Apple, similar to what the company offers with a brand new device.

“If you think about automobiles — brands like Lexus and Mercedes have been selling certified pre-owned cars. We have this programme in the US and in most parts of the world,” Cook said in an interview with BusinessLine .

Apple is also eyeing partnerships with telcos. In the US, iPhones are available at 70-80 per cent of the price under the telecom-contract model. Though Cook met a number of telecom operators, this could be a challenge due to regulatory issues. In India, operators have to pay a revenue share to the Centre on all income generated from telecom services. Income from sale of phones is considered to be part of the operators’ revenue and hence no telecom company wants to engage in bundling devices with a connection. The other big challenge is that consumers in India are mostly on prepaid billing and they may not want to stay hooked to a single network for 2-3 years. Operators who have tried similar schemes in the past have not had much success. But brand Apple could prompt some users to go for it.

The third part of Cook’s India strategy could be leasing smartphones directly to consumers. Apple currently leases smartphones in India only to corporates who can get the latest devices starting at ₹999 a month and switch to the next version whenever it arrives. 

“While we haven’t yet heard about Apple’s plans to offer leasing to consumers in India if ít does, it’ll be a big boost to iPhone sales here. Phone refresh cycles are still very low in India although there are consumers who refresh their phones every 6-9 months. Leasing will ensure people are able to upgrade phones on a regular basis,” said Kolla.

Cook, however, is in no rush to quickly grab market share. “We are patient people. We are not in India for a week or a quarter. We are in India for the next thousand years… I don’t have the goal to have the top share next week or next quarter,” Cook said.