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Calcutta, Oct. 7: Mobile handsets can’t get cheaper than this: come Diwali, a Calcutta-based company hopes to break the Rs 500 price barrier.

Xenitis Telecom Ltd, owned by Bengali entrepreneur Shantanu Ghosh, plans to launch its basic GSM handset for Rs 499.

Ghosh, who owns IT peripherals producer Xenitis Infotech and two-wheeler maker Global Automobile, is setting up a mobile handset factory at Hooghly in Bengal.

At present, the cheapest GSM handset retails for Rs 1,200; Reliance Communications, the Anil Ambani-owned CDMA operator, offers handsets at Rs 777.

Xenitis’ ultra low-priced handset will, however, be imported from China in a semi-knocked down (SKD) format and assembled here.

Ghosh reckons it is possible to manufacture a very basic workable handset at such a low price. “Mobile handsets are available at $10-15 in Chinese and south Asian markets. We have brought samples here and are testing them now. So far, they are working well,” Ghosh told The Telegraph.

Ghosh will sell the handsets under his Xtel brand name, but his company also aims to supply products to established players.

“It is difficult to build a brand and fight big companies like Nokia. Instead, we want to be a contract manufacturer for local players,” he said.

The Indian mobile handset market is projected to grow to 90 million units by the end of 2007.

The Indian Cellular Association, the apex body for handset manufacturers, estimates that the country will manufacture 50 to 60 million handsets this year and the number can grow to 250 million units soon.

Xenitis will be training its guns on the local brands of tiny players who import cheap handsets from China.

“We will start with SKD kits but will graduate to basic manufacturing in the next one to two years,” Ghosh said.

Initially, it plans to produce 2 lakh handsets a month. Ghosh claimed that a number of GSM mobile operators had evinced interest in sourcing handsets from his company.

“Mobile telephony operators are going deep into rural India with bundled offers of connection and handsets. The only way to penetrate those regions is by ensuring affordability,” he said.

The company expects to tot up a turnover of Rs 150-200 crore from the telecom business this year itself.

The unit is coming up next to Xenitis Infotech’s factory in Hooghly.

In April, the company signed a memorandum of understanding with Singapore-based Longcheer Technology to design and manufacture mobile handsets.