India mobile market expectations to 2022

Digital divide and market forces will bring varied outcomes to India’s telecoms circles through 2022

Publication Date: 27 Jul 2017 Inderpreet Kaur

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Product code: TE0009-001672

Digital divide and market forces will bring varied outcomes to India’s telecoms circles through 2022

Ovum view Summary This research note draws on Ovum’s Mobile Subscription and Revenue Forecast, India by Circle 2017–22, which provides a regional view of the Indian mobile telecommunications market, covering 22 telecoms service areas (or “circles”) in the country. The by-circle forecast through 2022, derived from the country-level forecast, offers an in-depth view of mobile subscriptions, service revenues, and ARPU for each telecoms circle.

Whereas the overall mobile teledensity in India has increased multifold over the past few years, a closer look at regional trends points to a stark digital divide. The Delhi and Mumbai metro areas have a teledensity of over 200%, while provincial markets including Bihar, Assam, Madhya Pradesh, and Orissa have seen mobile technologies reach just 55% of their total population. While the rural nature of much of the landscape and population in markets such as Uttar Pradesh, Madhya Pradesh, and Bihar has limited the rollout of fiber cables and mobile towers, the changing face of the Indian telecommunications industry will push operators to these nonurban pockets in search of subscription growth.

Subscription growth shifts outside metros and densely populated centers India is Asia’s second-largest telecoms market in terms of mobile subscriptions, after China. In 2016, the country added over 115 million mobile subscriptions (excluding M2M connections), accounting for over 35% of global net additions. The growth was led by the entry of Reliance Jio, a greenfield panIndian 4G operator, as it ended the year with 72 million net additions within three months of service launch in September 2016. Ovum’s Mobile Subscription and Revenue Forecast estimates that mobile subscriptions (excluding M2M) in India will grow at a compound annual growth rate (CAGR) of 3.4% over 2016–22.

Although teledensity in major metros and densely populated urban and semiurban pockets has exceeded 100%, rural teledensity in the same key telecoms circles is only around 50%. For instance, despite a high urban teledensity of 195%, Andhra Pradesh has been recording strong net subscription additions backed by the increasing uptake of mobile services in rural pockets. The rural teledensity of Andhra Pradesh stood at 60% at end-March 2017. Ovum has identified Bihar, Maharashtra, Gujarat, Uttar Pradesh (East and West), and Assam as the emerging centers for new subscription additions.

We expect Bihar to see the most net additions over the forecast period (Figure 1) as operators progressively extend their mobile networks to offer 95% population coverage through a combination of 2G, 3G, and 4G networks. With a teledensity of 55%, Bihar sits far below the national average, and below even those of neighboring states and telecoms circles.

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Digital divide and market forces will bring varied outcomes to India’s telecoms circles through 2022

Figure 1: India, net subscription additions and CAGR by circle, 2016–22

Source: Ovum

Technology migration will gather pace, driven by availability of low-cost LTE smartphones Despite leading the global market in terms of mobile net additions, the country lags behind in mobile broadband (LTE and WCDMA) take-up. Ovum expects 2017–18 to be a defining year for mobile broadband take-up, with operators pushing subscribers to more advanced technologies with lucrative data offers. Stiff competition has already led to a sudden decline in mobile broadband pricing, and the trend is expected to continue. Smartphone costs have also been declining, and 2017 is expected to see a surge in availability of affordable LTE- and VoLTE-capable phones.

The government’s Make in India initiative was well received by many local and international smartphone brands, including Apple. With local manufacturing, many vendors are ready to launch entry-level smartphones in the sub-$30 price range. At the same time, the increasing influence of Chinese smartphone vendors, which are now leading in terms of shipments, will push many local vendors to less-penetrated tier-2 and tier-3 cities for growth.

On the service provider side, operators will refarm existing GSM spectrum for mobile broadband services to make the most efficient use of available spectrum resources. Operators will use a mix of technologies to extend network coverage, leading to selective deployment of 4G, 3G, and 2G services depending on consumer demographics. Ovum believes that service providers will deploy extensive mobile broadband networks in metro and urban centers, while using 2G to offer extended coverage in rural and sparsely populated centers. Ovum expects the Delhi, Mumbai, and Kolkata metro areas to reach nearly 100% mobile broadband penetration by end-2022 (Figure 2).

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Digital divide and market forces will bring varied outcomes to India’s telecoms circles through 2022

Figure 2: India, mobile broadband penetration by circle, end-2022

Source: Ovum

Metros will lead in terms of ARPU, while Circle A markets will drive revenue opportunities As the industry moves through a phase of consolidation and faces competition from formidable new pan-Indian 4G operator RJio, Ovum expects mobile revenue growth to continue to be moderate in the short and medium term. The industry had been focusing on increasing mobile service ARPU over the past few years, but the entry of RJio has shifted incumbents’ focus to retaining subscribers. With this in mind, Ovum expects blended ARPU from mobile services to continue following a downward trajectory before returning to growth toward the end of the forecast period.

As shown in Figure 3, the recent data pricing wars between telcos have had a much deeper impact on metro circles, where adoption of mobile broadband and smartphones is higher than the country average. Blended ARPU from mobile services declined 5.7% year on year for the country as a whole in 2016, but the Mumbai and Delhi metro areas recorded declines in blended mobile ARPU of 12.9% and 10.9%, respectively, over the same period. But Ovum believes that faster adoption of data-heavy applications such as over the-top-video and music services, voice and video calling applications, ecommerce, and online gaming will provide operators in metro areas and urban pockets of the country with an opportunity to expand mobile data ARPU much more quickly than those in other markets.

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Digital divide and market forces will bring varied outcomes to India’s telecoms circles through 2022

Figure 3: India, mobile ARPU, selected circles, 2014–22

Source: Ovum

Appendix Further reading Mobile Subscription and Revenue Forecast: India by Circle, 2017–22, TE0009-001667 (July 2017) “Indian operators take financial hit in wake of Reliance Jio’s LTE launch,” TE0016-000333 (Feb 2017)

Author Inderpreet Kaur, Analyst, Asia-Pacific inderpreet.kaur@ovum.com Dimitris Xydias, Senior Forecaster dimitris.xydias@ovum.com

Ovum Consulting We hope that this analysis will help you make informed and imaginative business decisions. If you have further requirements, Ovum’s consulting team may be able to help you. For more information about Ovum’s consulting capabilities, please contact us directly at consulting@ovum.com.

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Digital divide and market forces will bring varied outcomes to India’s telecoms circles through 2022

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