“Illegal imports affect the government revenue and honest importers while sub-standard products affect the customer directly.”

There is aggressive import and penetration of mobile phones in Nepal from almost every global phone maker. While it offers the consumer greater choice and competitive pricing, it has also led to duplication, unhealthy price war and fraudulent activity. The first Mobile Phone Importers Association (MPIA) was recently formed to address the growing market and the challenges associated with it. It has Deepak Malhotra, Executive Chairman of IMS Group as its President. Malhotra is one of the first mobile phone importers of Nepal and his Group is the authorised importer and distributor of Korean Samsung mobile phones. In a short conversation with Ashok Thapa from Business 360°, Malhotra shared why the Association was formed, his agenda as its President, the current situation of the mobile phone market among other issues. Excerpts:

Why was the Mobile Phone Importers Association (MPIA) formed? As the President what is your agenda?

I am not a big believer of associations and unions. I truly believe if everyone plays their roles well and fair, there would not be a need for it. However, the need for MPIA arose as the mobile phone industry has grown very rapidly in the last few years attracting potential as well as fraudulent investors. The increase in the grey market supply and demand made companies paying all the taxes, fulfilling all legal procedures and working within international and national policies very difficult to operate. Illegal mobile phone importers started selling cheaper products because they did not have any extra cost. This association is an outcome of the need for putting into place regulations to safeguard actual investments as well as working with the government on how VAT returns could be transferred at deducted prices and customers could benefit from competitive pricing. As its President, I am willing to share my knowledge and experience from having been the longest in this industry to new and upcoming businessmen within this industry. I am also going to help achieve fair decisions that benefit our government, importers and customers.

MPIA, among many other objectives, has an objective to make the mobile phone market disciplined and responsible. What does this mean?

People fear investing in Nepal due to insecurities in return on investment. They do not take risks on new ideas rather wait to see others make profitable business and then invest expecting the same returns. When business for Samsung boomed in Nepal and when smart phones became the need of the generation, many brands entered the market. This huge supply of new entrants gave retailers the opportunity to bargain on prices and credit time. Initially brands can invest on marketing and offer credit, but after a point that is not a sustainable way to do business. This phenomenon has led to indiscipline and lack of accountability. Small businesses are looking to make short term money by following whoever is willing to offer longer credit or give higher margins. If we are to make vision for a long term financially strong business, we must make strategic decisions on where we must invest and create our own positions. I believe we are a group of intelligent investors at MPIA and we can achieve this feat soon.

How do you overview the mobile phone market here?

According to the data provided by Nepal Telecom Authority, mobile phone penetration is said to be 107 percent however this percentage is based on the number of SIM cards distributed. We must note that many SIM cards are inactive, many use dual or triple SIMs, and some are used temporarily while others are not even in the country. This means that the data isn’t entirely correct. I would think approximately 70 percent of the market has been penetrated and 30 percent is still in vacuum. Annual import of handsets stands approximately at seven million sets with a value of around Rs 20 billion. There are around 50 brands in total in Kathmandu of which only around 16-20 are of international standard with around 20 importers who import branded phones in our country. The mobile phone coverage is countrywide and has reached all 75 districts. In this way, what we can deduce is that the market has still potential to grow and that the industry is in no way smaller than others.

With the invention of newer technology led handsets and import of the same, consumers are confused at the choices. What would your suggestion be to them?

We live in an era where we are spoilt with choice and maybe that’s why everything is temporary. If you bought a phone in the yesterdays, you would expect to use it for 10 years or more. The case no more persists. Today, people buy phones and carry the same only about a year at maximum. So it is great that customers have options so that they can make an individual choice. It depends on individual needs and priorities. Some people buy a phone just to make and receive calls or text while others might be interested in camera or to make notes or check emails. I think the most important thing universally is to look for quality. Today you have your phone with you every waking hour, so investing in one that will perform well can help you lead a slightly stress-free life. Brand awareness is also key. Good brands invest in R&D so there is less risk and high performance in products. So whatever phone you choose, make sure it belongs to a good and reliable brand.

The issue of sub-standard products and illegal imports is a major concern for MPIA. How will you address this issue?

Illegal imports affect the government revenue and honest importers while sub-standard products affect the customer directly. When I say sub-standard, I do not mean for example duplicate Samsung phones, rather original Samsung that have been manufactured for another country. When sending phones to Nepal, it is tested with service providers like Axiata or NTC beforehand so when illegal phones are used here, it could hang, not work or even just get spoilt completely. We, at MPIA are now tying up with Nepal Telecom Authority to create a white list. This means that when importers import phones, we will have to register with NTA every IMEI number. Any mobile-phone which is not registered will be blocked and customers buying phone from elsewhere will have to register it to get on the white list. Many countries have this system as it ensures safety for people. Mobile phones imported from the right channel can be tracked providing a good mechanism for safety and crime control. We have been voicing this concern for many years and this is also among the main reasons to establish MPIA.

What are the challenges and opportunities of the mobile phone market in Nepal?

The challenges range from political instability to the rise of the grey market. There is extreme unhealthy competition in the mobile phone market while brands are using conspiracy tools instead of promotional strategies to lure retailers to make profits from other ways rather than focusing on sales. The beauty of this industry is that this is one of the worlds’ fastest growing industries with new and excited innovations happening at regular intervals. It is also challenging and pushes us to think ahead and keep moving forward. This fast changing industry with customers preferences varying, keeps us on our toes. There is an ample opportunity in terms of creating apps, various online businesses, marketing, e-commerce, gaming etc.

How will price differentiation for the same product be addressed?

This is another big issue we are facing and we at MPIA are working very closely with retailers and distributors of all major brands to tackle this issue in the most effective way possible. We are doing home work to come up with a standard pricing mechanism to avoid confusion for customers. We will soon issue a minimum operating price (MOP) of mobile phones to all and ensure consistency.