Apple to cut iPhone 4S price, make it entry level model

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iPhone-4SKOLKATA: Apple may slash the price of iPhone 4S, encouraged by the surge in July-September sales of iPhones in emerging markets such as India, CEO Tim Cook suggested in remarks made in a conference call with analysts.

The price cut may ensue as Apple is withdrawing the $400 iPhone 4 from the market. Cook said 4S will become the entry model that will drive adoption of Apple iPhones among first-time users in emerging markets.

“As you know from comments that I’ve made previously, we’re selling iPhone 4 in very good volumes and as we begin to experiment in different regions, at somewhat lower price points, we saw a fair amount of price elasticity and so we’re hoping and thinking that, that will continue with 4S,” Cook said on the quarterly earnings call.

This is the second consecutive quarter in which the Apple management spoke about rising sales in India.

“We were particularly pleased with growth in a number of developing markets, with unit sales up sharply, year-over-year in Latin America, the Middle-East, Russia and India,” Chief Financial Officer Peter Oppenheimer said on the call. Globally, iPhone sales rose 26% from the year-ago quarter to 33.8 million units.

Cook didn’t specify whether the 4S will be priced the same as the iPhone 4. “As you know, currency changes and the strength of the dollar (don’t) play in our favour in some (geographies)… but generally we see 4S as our entry iPhone offer that gives somebody the ability to access the entire ecosystem with a fantastic product,” he said. “We clearly understand that there is elasticity in that market and we will move accordingly.”

Earlier this year, Apple lowered the price of iPhone 4 to Rs 26,500 with a buyback offer that offered an additional Rs 7,000 discount against any old smartphone, which helped Apple rapidly gain market share. About a week ago, Apple lowered the price of iPhone 4S 16GB version to Rs 34,500 from Rs 38,500 and is to launch an 8GB model, the price of which is yet to be announced.

Apple will need an iPhone in the Rs 20,000-25,000 bracket to drive sales volume, said Himanshu Chakrawarti, CEO of The MobileStore, the country’s largest cellphone retailer. He said iPhone 4 accounts for 50% of total iPhone sales by value and almost 65-70% by volume in his stores.

Following third-quarter earnings in July, Cook had said iPhone sales in India grew 400%, one of the fastest expansions worldwide for the company. The acknowledgment of India’s business potential in two consecutive quarters contrasts, with Cook having said last year that he felt there were better business opportunities elsewhere.

Market tracker CMR estimated iPhone’s market share in India by unit shipment was 2% of the total smartphone market in the July-August period compared with 0.8% in the year before. In contrast, Samsung had a 32.1% share, followed by Micromax (20.4%), Karbonn (9.9%), Nokia (5.4%) and Sony (4.2%). Shipment figures for September aren’t available. Research agency Canalys estimated Apple’s value share at 5%. Apple started gaining market share in India with the iPhone in December when it appointed two retail distributors, started an advertising campaign, launched buyback offers that reduced the effective price of iPhone4, and allowed buyers to pay in instalments.

Apple will unveil its two latest iPhones, 5C and 5S, on November 1 priced between Rs 41,900 and Rs 71,500. The new iPhones may not change market dynamics substantially, since rivals now have a large range of models with bigger screens, said CMR’s telecom practice lead analyst Faisal Kawoosa.

Apple recently integrated its iPad business and distribution in India with the telecom business team headed by Sanjay Kaul, in a move to boost tablet sales. The iPad business was earlier managed by the Macintosh computer business team. With this, Apple will start distributing its iPad tablets to telecom and electronic retailers, riding on the retail network for iPhone in India, which includes more than 5,000 stores nationally. “Apple is re-launching the iPad business in India, with plans for display of live models in stores and aggressive marketing plans that would lead to higher sales and offer tough competition to Samsung,” said a senior executive at a leading electronic retail chain who didn’t want to be named. The trade estimates that Apple has a 23% value share of the Indian tablet market while Samsung’s is more than 60%.