HONG KONG (Reuters Breakingviews) - India will test Xiaomi’s two-pronged strategy. The Chinese group is known for selling affordable smartphones but even a scaled-down valuation target for its initial public offering hangs on success in more profitable internet services such as music and video streaming. Xiaomi is rolling these offerings out in its top overseas market, but may struggle to make an impact.
Xiaomi’s subsidiary in India generated roughly $950 million in sales in the three months to March. That’s nearly half the company’s international revenue and a fifth of the overall total.
It is already a top-selling brand in India with a 30 percent share of smartphone shipments, Counterpoint estimates. The data-tracker reckons the market for these devices is set to grow 17 percent this year. That pace looks sustainable: researcher eMarketer reckons barely a quarter of the population will use a smartphone by the end of the year. By contrast, shipments in China fell 8 percent in the first quarter of 2018, the highest year-on-year decline.
Even so, Xiaomi will have to work hard to defend its Indian position. Huawei, for one, wants a 10 percent market share by the end of this year, according to local news outlet NDTV.
Things will be even tougher in services. Xiaomi recently launched three apps in India. It has also picked up stakes in local startups, including music-streaming outfit Hungama. That’s different from the approach in China, where Xiaomi risks less of its own capital by partnering with web giants for games and online videos.
Falling prices for mobile data in India have unleashed a bruising battle for online content. Hungama is up against Apple, Amazon and local upstart Gaana. India’s richest man Mukesh Ambani, whose Reliance Jio mobile network has started to sell its own reasonably priced phones, has also acquired a music-streaming service, and owns stakes in film and television producers.
After postponing a mainland China share sale that was supposed to coincide with its Hong Kong IPO, Xiaomi is now expecting to be valued at between $55 billion and $70 billion, down from $100 billion. The company’s ability to grow in India and beyond may warrant more consideration.
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