Samsung, Micromax Planning To Stop 2G Phones

Samsung and Micromax, the leading sellers of smartphones in India, are planning to discontinue so-called 2G phones and focus on devices that run on faster 3G and 4G networks as prices have dropped sharply for such handsets in the past year. Then there’s the Reliance Jio effect.

“The focus has shifted to 4G phones with telecom operators launching such services,” said Micromax Informatics chief executive officer Vineet Taneja. “4G models already account for 30% of our portfolio with 14 models and will increase to 20 by March.”

The imminent launch of 4G services by Reliance Jio Infocomm has prompted incumbents Bharti Airtel and Vodafone to launch their own high-speed networks in anticipation of competition. That coupled with falling prices has almost wiped out demand for handsets running on 2G.

Senior executives of three leading retail chains said on condition of anonymity that both companies have told them and other trade partners that no more new 2G smartphone models will be launched. Prices of 3G and 4G smartphones, which also support 2G, may drop further to fill the price vacuum created by the exit of 2G.

Both companies are currently liquidating 2G phone stocks, they said. Of the 25 models that Samsung launched this year, 16 are 4G enabled. A Samsung India spokesperson hadn’t responded to an email as of press time Wednesday.

The price factor                                                                           Industry executives said the companies are exiting 2G smartphones after sales slumped in the past year. In the July-September quarter, 2G devices accounted for 9% of total Indian smartphone sales compared with 25% in the same period last year, Counterpoint Research has estimated. 2G smartphone sales are now just 5% of total sales and further dropping due to lack of availability, said Subhash Chandra, managing director of cellphone retailer Sangeetha Mobiles.

“Only the Indian brands continue to have 2G smartphones in their portfolio. And very soon they will also run out of them since there’s no fresh manufacturing or imports,” Chandra said.

Counterpoint Research senior telecom analyst Tarun Pathak also cited the narrowing price differential.

“2G smartphones are no longer a viable business proposition and we expect all brands will exit the segment in couple of quarters,” he said.

Pathak said most leading Indian brands such as Micromax, Karbonn and Intex were offering 2G smartphones last year at prices that started below $50 (Rs 3,300). The cheapest 2G smartphone this year costs $26 (Rs 1,750) while a 3G device is available for $29 (Rs 1,950), he said. 4G smartphones start at Rs 5,000.

Intex Technologies may also exit 2G smartphones after the first quarter of the next fiscal, said Sanjay Kumar Kalirona, mobile business head. It has three 2G models selling about 1.5 lakh units per month.

“We can expect the starting price of 3G smartphones to come down to Rs 2,000. We expect a similar downward trend for 4G devices to Rs 4,000,” Kalirona said. Others brands such as Lava still sell 2G smartphones but they too are evaluating these models as the share of such devices is dwindling, executives said.