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Apple Pushes for Market Share in India, but Economy Could Spoil Ambitions

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Windows Phone outsells iOS in India. Apple wants to change that.

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Apple (NASDAQ:AAPL) is making a push to gain market share in India. Branching out into this market is a smart move, but with the economy slowing down and the rupee losing value, there is no guarantee that it will work now.

The Economic Times, an Indian business paper, reported that Apple will finally make a push to get iPhones and iPads into Indians' hands by opening "stores within stores" in small towns in the country. To reach a $1 billion revenue goal, the company is seeking 100 exclusive standalone franchises, mostly in smaller towns.

To give you an idea of how poorly Apple sells in India, just note that Microsoft (NASDAQ:MSFT) Windows Phone outsells it. Currently, Google's (NASDAQ:GOOG) Android operating system enjoys 91% of the smartphone market share in India, according to IDC. Windows Phone takes 5.4% share, and iOS powers just 2.3% of India's smartphones.

The reason for this is obvious: Apple products aren't cheap, especially not in rupees. Like China, Indian telcos don't normally subsidize handsets. If this were the case in the US, it would seriously stall the growth of the smartphone market. Coughing up $200 is much easier than parting with upwards of $700, even for a premium quality phone.

But for Indians, it's a bit more extreme. Would you give up eight months of your salary for a phone? The iPhone 5 costs 45,000 rupees in India, which is pretty close to the estimated current price per capita income of Rs 68,747 (ignoring, of course, India's rampant income inequality). A Samsung (OTCMKTS:SSNLF) Galaxy S4 is just a few thousand rupees less. Most smartphones in India are on the lower end of Rs 7,000 to 12,000. The long-awaited "cheap" iPhone, the 5C model, is still out of reach for most Indians, according to Canalys. High import taxes don't help.

Couple that with the rupee's unprecedented plunge this summer following the Federal Reserve's taper announcement, and it's pretty hard for even wealthy Indians to afford a top-shelf iPhone.

After the rupee went from 53 against the dollar to 68, Samsung, the current market share leader, increased prices in India, but Apple opted to let its margins erode to gain a slight price edge on its rival. It also introduced financing options and discounts to lure customers. In addition, it is hoping to sell more of the older iPhone models such as the fourth generation, which aren't selling much in the more developed markets such as the US.

Currently, the top 10 cities account for 90% of Apple's India revenue, though there isn't a single official store in the country. Its revenue jumped 223% in India during the 2011-2012 fiscal year.

While a concerted push to place Apple stores in shopping areas around India could help make the phones available, Apple products will likely remain a niche luxury status symbol.

Another reason to be skeptical of Apple's potential in India is the alarming slowdown of its economy. In the latest quarter with data available, India grew at a 4.4% annual rate between April and June. While the US, Europe, and Japan would be ecstatic about such a growth rate, that's the slowest that India has grown in four years. A slowing economy and weakened currency could dash consumer confidence -- and Apple's hopes in the world's second-largest country.

Twitter: @vincent_trivett
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