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Siemens, the third largest selling brand in the GSM handsets world, has not made any splashes in India yet. Is this set to change? Siemens' board member Lothar Pauly, in India recently, certainly hopes so. The company, attracted by all the action in the Indian market (over 800,000 new subscribers in May took the total to 14.2 million), has launched six trendy new handsets in India last month. Here, Pauly tells BT Online's Vandana Gombar about the trends in the mobile market, the non-threat of the competing cellular technology CDMA and the migration path to 3G telephony. Q. Lets begin with India first. Siemens phones, to put it mildly, are not popular here. Blame it on visibility...battery problems... A. Our market share in India is quite low (under 5 per cent), and there were quality problems with phones -- typical of grey market products. The launch of new models and distribution channels (through a tie-up with Tech Pacific) is an attempt to redress that. We believe India is going to develop into Siemens' second most important market in Asia, after China. Q. With the commoditization of the telecom business, what, in your opinion, would be the differentiator for operators in the future? A. The user interface is an important part of providing differentiation. Operators like Vodafone in Europe are specifying user interface for the phone manufacturers. In the medium term, I expect 50 per cent of the market to have specified user interfaces. Q. The medium term would also see the uptake of 3G telephony services where CDMA, a standard that you have chosen to abstain from, is widely perceived to have an advantage over GSM. Is that not a cause for concern? A. GSM subscribers outnumber CDMA subscribers by over five times, and even in the incremental uptake, GSM vastly outpaces CDMA, and is cheaper because it is licence-free. CDMA 1X, which is live in many countries, is a 2.5G technology. GSM's route to 3G is well-mapped and there are some countries where the next generation EDGE (Enhanced Data Rates for GSM Evolution), allowing data rates of up to 384 kilobits per second, is being rolled out. Also, I would like to add that it is not speed that matters, but the applications that are available. Q. What will be the drivers of GSM growth globally and in India? A. The no-credit risk segment of pre-paid is a very important key to enhance usage in new categories. I don't see a revolutionary killer app in the future which will suddenly spurt numbers. Picture usage will move to video clips over a period of time. Q. How do you perceive the threat from Wi-Fi, where mobile data can zip around at upto 11 megabits per second, while phone companies are still limited to kilobits, even in a 3G environment? A. Wi-Fi is not a very secure technology. It is fairly easy to eavesdrop while the data is moving through the air, and we in Siemens are not allowed to use Wi-Fi for this reason. There are other problems too. For a 20,000 square kilometre area, Wi-Fi coverage would require 63 access points against just 1 UMTS station. Wi-Fi has application in the data market, residential and corporate, but it cannot replicate the seamless mobile voice currently offered by the telecom companies. It is wireless but not mobile beyond a limited area. Q. In India, operators are currently facing declining average revenues per user (ARPU), but the subscriber base is still being expanded to embrace users in lower income categories. Is ARPU a good benchmark for future strategy or should the companies focus on average margins per user? A. There is no doubt that AMPU is a much more sophisticated way of looking at the subscriber base than ARPU. Nevertheless, the cost of customer acquisition is a crucial number in the matrix. In a market where handsets are subsidised (which is not the case in India), it does not make sense to acquire a low ARPU user. On the other hand, in non-subsidised markets like Italy and India, new subscribers can be acquired without any loss.
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