A tainted Indian league gets Chinese smartphone backer

MUMBAI, India - The Chinese are coming and they are setting their sights on cricket in South Asia.

After Pepsico Inc. broke off its 3.97 billion-rupee ($61 million) sponsorship deal with the glitzy Indian Premier League , a Chinese smartphone maker is stepping in to gain from cricket's almost religion-like status in a region of 1.2 billion people. Vivo Mobile India, a unit of Guangdong BBK Electronics Industry Co., replaced Pepsico as the title sponsor, undeterred by the fading popularity of the tournament which has lately been plagued by many scandals.

While Vivo has surprised most Indians who have never heard of it, the cricket contract may just be what the Chinese company needs, scandals notwithstanding, to expand its reach in one of the world's fastest-growing smartphone markets. India's smartphone market is likely to overtake the United States to be the second biggest in the world by 2017, according to International Data Corp.

Vivo, which made its mark in China with smartly designed phones that sell for less than $100, will mainly compete with local handset makers Micromax Informatics and Intex Technologies India, and other Chinese manufacturers, said Neil Shah, research director at Counterpoint Technology Market Research in Mumbai.

"India is a huge opportunity for everyone and whoever keeps investing now will recoup the rewards later," Shah said in an interview. "Just look at Samsung and Micromax- they invested hugely in setting up a network and are No. 1 and 2 for quite some time now."

Vivo has a history of rapidly grabbing market share from established rivals. In its highly competitive home market, the company rose to the fourth place ahead of Samsung Electronics Corp. with a 8.1 percent share of the Chinese market, from an 11th place less than two years ago, according to Counterpoint.

India's smartphone market can be divided into three categories, with different companies dominating each band. Local handset makers Micromax, Intex and Karbonn Mobiles India dominate the sub $100 category, whereas Chinese manufacturers Xiaomi and Lenovo Group are known for their models that range between $100 and $150, Shah said. Samsung is the biggest seller of the higher end phones up to $400.

Vivo has eight models currently selling in India that range from $92 to $510, though if it's China business were an indication, then most of the sales focus will be on the cheapest models.

"They develop the high-end models and advertise it extensively, but their volumes come from the cheaper models," Kiranjeet Kaur, a senior analyst at International Data Corp., said in an interview. "They'll probably take the same approach in India."

But the path in India will take a long time. The company's market share was 0.5 percent in the quarter ended June, according to Counterpoint data. That compares with market leaders Samsung and Micromax, which control about 25 percent and 18 percent respectively.

The IPL, where eight teams compete in the Twenty20 short- format version of cricket, started in 2008 when the Board of Control for Cricket in India auctioned off the league's clubs to investors including billionaire Mukesh Ambani, chairman of Reliance Industries, and movie star Shah Rukh Khan.

The rapid-fire appeal of a Twenty20 match has led to high- scoring games, with more risk-taking by the batsmen, attracting viewers who otherwise don't have the time to watch the game's classic format five-day test matches or a one-day face-off that is typically played for about six hours, not including lunch and refreshments.

However, the league's reputation has been tainted by allegations of illegal betting and match-fixing.

The biggest scandal in the IPL came to the forefront in 2013, when several players and team officials were arrested on charges of placing bets on matches, a practice that's illegal in India. Earlier this year, the Board of Control for Cricket in India suspended two teams -- the Chennai Super Kings and Rajasthan Royals -- for two years. Chennai's team was among the league's most decorated, and headed by Indian national team captain Mahendra Singh Dhoni.

Reports of Pepsico's termination of the title sponsorship deal were doing the rounds in the local media for two weeks. Then on Oct. 18, the cricket board said that Vivo had been appointed as the title sponsor for two years. Pepsico India spokesman Pradeep Wadhwa declined to comment.

Partly because of these scandals, and also because of a plethora of cricket on television, the allure of the sport for audiences has fallen. This has made the return from IPL sponsorships "somewhat unpredictable," giving pause to consumer goods conglomerates and other established companies that've formed the bulk of cricket-related advertising in India, said Ajimon Francis, head of India operations at consultancy Brand Finance Plc.

"The traditional sponsors would be a little more watchful due to the topsy-turvy nature of the tournament," Francis said via phone. "Internet enabled companies are the new wave of sponsors coming in."

However, by putting its name on a popular cricket series that is viewed on television by millions of Indians, Vivo will be able to quickly engender widespread brand awareness, Counterpoint's Shah said. The scandals may not have a sizable impact on the company's prospects.

Getting the sponsorship "is a really good win for them," Shah said. "Rural people may not have 2G and 3G connections but they do have a TV."

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Contributors: Haixing Jin in Beijing and Annie Lee in Hong Kong.

Source: A tainted Indian league gets Chinese smartphone backer