A Tainted Indian League Gets Chinese Backer No Local's Heard Of

Chennai Super Kings batsman Murali Vijay

Chennai Super Kings batsman Murali Vijay plays a shot during an IPL Twenty20 cricket match in Chennai, India.

Photographer: Dibyangshu Sarkar/AFP/Getty Images
  • Chinese smartphone brand Vivo steps in after Pepsico exit
  • India's cricket league tarnished by match-fixing allegations

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 10 days ago, 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 Pvt., 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 scandals.

While Vivo has surprised most Indians who have never heard of the brand, 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 is set to overtake the U.S. to become the second biggest mobile-phone buyer in the world by 2017, according to International Data Corp.

“We think IPL is the most influential brand in India,” Alex Feng, chief executive officer of Vivo Mobile India said in an interview. “It can help raise people’s awareness about Vivo in India. We think it’s the best platform.”

Feng declined to comment on the price paid for the sponsorship, except to say that the deal was “worth the price.” The brand, 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 Ltd. and Intex Technologies India Pvt., and other Chinese manufacturers, Neil Shah, research director at Counterpoint Technology Market Research in Mumbai, said.

“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.”

China Rivals

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.

The company’s phones are available at 10,000 outlets in India, Feng said. Vivo will stay focused on selling through brick-and-mortar stores rather than online sales, he said.

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 Ltd. dominate the sub $100 category, whereas Chinese manufacturers Xiaomi Corp. and Lenovo Group Ltd. 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 seven models selling in India that range from $92 to $510, though if its China business were an indication, then most of the sales focus will be on the cheapest models.

Short-Form Cricket

“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 each.

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 Ltd., 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.

Match-Fixing Allegations

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

In 2013, several IPL 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 citing misconduct by its officials. Chennai’s team was among the league’s most decorated, and headed by Indian national team captain Mahendra Singh Dhoni. Spokesmen for Rajasthan Royals didn’t immediately respond to an e-mail seeking comment, while Kasi Vishwanathan, director, at Chennai Super Kings, declined to comment.

Pepsico said Oct. 9 that it had notified the cricket board about its “concerns” over the tournament and that discussions were ongoing between the two parties. About 10 days later, the board announced that Vivo had been appointed as the title sponsor for two years. Pepsico India spokesman Pradeep Wadhwa did not respond to a phone call and text message seeking comment. BCCI spokesmen Nishant Jeet Arora and Gaurav Saxena didn’t immediately respond to e-mails seeking comment.

Falling Allure

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,” prompting consumer goods companies to reduce their engagement with the sport, said Ajimon Francis, head of India operations at consultancy Brand Finance Plc.

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.

“Even the Olympic Games or the World Cup may have such controversies,” Vivo’s Feng said. “That cannot change the impact that cricket can make in India. It’s an activity for everyone from different regions, religions, ages, languages.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE