Ingram might hive off telecom business into separate division

The telecom business is a focus area for distribution giant, Ingram Micro
India Ltd (IMIL). And so it should be. It has already contributed almost

eight percent to the company's revenues in 2006-07 and the next fiscal it is
expected to be at least 14 percent. This is what Krishnan Jaishankar, MD, IMIL
believes.

This is also why he would like to have telecom as a separate profit-making
unit with an independent team and target. “This is on my agenda and it is a
natural evolution since the telecom market itself in India is growing rapidly,”
he said.

IMIL has already put in place a different team for the telecom business under
Mitradutta Mohapatra, who is also looking after the peripherals and supplies
turnover. It follows a three-tier distribution model. It has territory
distributors who then sell to retail outlets. “At present we have around

100 territory distributors who have non-overlapping geographies defined for
them. Each of them has 300 odd retail outlets. In some areas, we go straight to
the retailers depending on the size of the market,” Jaishankar mentioned.

K JAISHANKAR: “Currently, we have around 100 territory distributors who have non-overlapping geographies defined for them and each of them has 300 odd retail outlets”

In Australia, Ingram has alliance with Telstra where it procures the telecom
products (in the wireless local loop and fixed line installations), brands and
then distributes it. When asked whether IMIL could consider following this
example, Jaishankar said he was open to the idea.

“We have an in-house brand and we can create our own portfolio of mobile
products, especially catering to the entry-level market, which is sadly being
ignored. However, right now we are involved in too many things, which is why we
have put this on the back burner for the moment,” he claimed.

Sony Ericsson, which is being distributed by IMIL, is well placed in the mid
and high-end handset market with barely any offerings in the entry-level. A
large segment of the buyers prefer to go for the lower-end products. This is why
Nokia is doing well, especially with its Indianized mobile handsets.

“Sony Ericsson does not want to be in this entry-level market. Their USP is
their color handsets with good music features. The entry-level customers want a
basic phone for communication, especially in the rural areas. Thus we are
missing out on a major chunk of the business,” noted Jaishankar. This is also
the very vacuum that IMIL can plug with its own brand of mobile handsets.

Currently, IMIL has Sony Ericsson under its banner. Pre-merger, it had
Siemens and BenQ as well under Tech Pacific, but these brands were knocked off
when the mega-merger took place. It decided to stick to Sony Ericsson though and
this move has paid off. After Nokia and Motorola, Sony Ericsson is reckoned to
the third leading brand in mobile phones in the country. It has already captured
close to 10 percent of the marketshare, up from four percent a couple of years
ago. Considering that IMIL has been distributing this brand since mid-2005, this
is not a small feat.