BANGALORE: India - After deliberating for months, Abhilash Sathyendra, a 25-year-old equity adviser in Mysore, India, bought his first Apple phone. He paid 9,000 rupees, or $150, upfront for a black iPhone 4s and swiped his credit card for the remainder, six no-interest monthly payments of $62.50.
"I've used Android phones forever, but the iPhone is hardier and makes a social statement," said Sathyendra, whose new phone has become a conversation opener with clients. "I think I look, not wow, but cool and corporate," he said.
Indians use the monthly payments, called equated monthly installments, to buy a variety of products and services, like branded jeans and cosmetic dental treatments. That Apple used this method too clinched it for him. "EMIs make the iPhone affordable to Indians like me," said Sathyendra, who takes home a salary of $400 a month.
In 2013, Apple wakened to the potential of the world's fastest-growing smartphone market. India also happens to be the second-largest mobile market, with 800 million active users. "Apple sees that the market is at a takeoff point. Sales numbers could get serious within a year or two," said Anshul Gupta, a Mumbai-based principal analyst for mobile devices at the research firm Gartner. Apple's shipments have doubled from 2012 and will surpass 1 million phones in 2013, Gupta said.
In a price-sensitive country where multinational corporations sell bottles of soda for 16 cents, pizzas for 75 cents and burger meals for $1.40, basic cellphones have dominated the landscape. Smartphone penetration is less than 20 percent of the phone-using public. But a combination of falling prices, fast 3G speeds and a thriving app ecosystem is fueling the adoption at ripping speeds.
Shipments more than doubled, to 41.4 million, last year, according to IDC, a market research firm. The smartphone market grew 229 percent year-on-year in the third quarter of 2013, and IDC projects shipments will exceed 129 million by 2015.
With that kind of energy, this is a market where Apple can no longer afford to be a fringe player, selling to an elite few and losing out to pushy rivals. It is also a market where 80 percent of smartphones sell in the range of $70 to $200, said Gupta, the Gartner analyst. High prices have kept Apple at the tail of the top 10 brands by sales, way behind No. 1 Samsung, which sells more than three-quarters of its phones for less than $400, and No. 2 Micromax of India, whose most expensive phone is $350. The cheapest iPhone costs about $525 in India.
To draw young buyers and increase its volume and market share, Apple, based in Cupertino, Calif., offered a number of enticements besides the payment plan. Full front-page newspaper ads and TV commercials in recent months offered bonuses for trading in certain old phones and multiple deals, but with a single carrier so far. Wary of the inevitable branding-versus-pricing dilemma, Apple carefully couched these offers to not look like discounts.
"Apple has shown great agility in their India strategy all through 2013," said Manasi Yadav, a Bangalore-based senior mobile industry analyst with IDC India.
Making the phones cheaper, without appearing to be cheap, is enticing a new category of young, brand-conscious Indians, like Chaithra Nayak, to switch to the more expensive iPhones. Nayak, 24, who studies in the bustling coastal city of Mangalore, took six months to persuade her parents to get her an iPhone. Her father, a businessman, eventually buckled when she told him she could trade in her old Sony smartphone for a discount of Rs 13,000, or $216, on the iPhone 5c, which costs Rs 41,900, or $698.
"When I use my blue-colored iPhone, I draw attention," Nayak said.
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