Micromax closing in on Nokia in India

On a hot summer afternoon in 2007, executives at a small Indian pay phone company called Micromax noticed a curious sight. In a village in the eastern part of the country, they watched people line up next to a man with a car battery strapped to the back of his bicycle and hand him a few rupees to plug their cell phones in for a half hour's worth of charge. The villagers' homes didn't have electricity.

 

Less than a year later Micromax sold its first cell phone, the X1i. It came with an oversized battery, a small screen, and tweaked electronics that made the phone run for as long as five days, and on standby for as many as 30 days. "It was really the most obvious thing to do," says Vikas Jain, who co-founded the company in 1991 with three friends. "Here was something that provided customers a feature nobody else had bothered to give them—battery life."

 

Micromax, based in Gurgaon, a city near New Delhi, has introduced 37 phones in just over a year and a half, designing them in India and manufacturing with partners in China. The company has kept its phones affordable—they start at $40—and tailored to local tastes. Few Micromax handsets bother with Wi-Fi, 3G, or GPS capabilities, for example. That keeps costs down in a country where there isn't much Internet access and very little 3G coverage. One phone doubles as a Nintendo Wii-like controller, allowing users to play games on a television game console. Another, marketed heavily with Bollywood-themed TV commercials, has costume jewelry embedded in it and swivels open to reveal a full keyboard. Micromax is selling about 1 million handsets each month, or about 4 percent of the $6.3 billion Indian market; Indian phone makers as a group have grabbed 14 percent of the market, according to research by Indian trade magazine Voice&Data. That gain has come largely at the expense of global giant Nokia, whose share in India fell from 64 percent in 2008 to 52 percent by the end of last year. Jain says he plans to sell 30 million phones a year by the end of 2011—including 6 million in Africa and Latin America.

 

Micromax's approach has attracted interest from Boston-based TA Associates, a $16 billion private equity fund that invested $45 million in the company in January for an undisclosed stake. "We did spend a lot of time with the broader universe of Indian phone makers," says Naveen Wadhera, a TA Associates Advisory director based in Mumbai who worked on the deal. "But what we specifically wanted was someone with a real focus on product and a real effort at innovating. The others have a bit of a me-too sort of strategy."