After a
prolonged period marked by regulatory delays, 3G services were finally launched
in India in the last quarter of 2010.
Evalueserve
had predicted in its September 2009 whitepaper, Uptake of 3G Services in
India, that 3G subscriptions in India will cross the 275 million mark by
end-2013.
However,
licensing delays resulted in 10-month worth of subscriber loss vis-Ã -vis our
previous estimates. 3G performance in 2011 was also negatively affected by
network issues at operators’ end.
Nonetheless,
Evalueserve believes that the current inhibitors to 3G uptake are short term in
nature, and 3G subscription will increase at a rapid pace (30 percent CAGR –
Compound Annual Growth Rate) between 2012 and 2016 to cross the 200-million
mark.
Along with
3G services, the number of 3G-enabled mobile handsets will also continue to
grow, reaching an active installed handset base of 680 million by 2016. Boosted
by better handsets and data speed, mobile value-added services will also boom
in the future; Evalueserve expects total MVAS users to reach 430 million during
the period.
This whitepaper sheds light on the current and future outlook for 3G services
and highlights the drivers, inhibitors, and success factors that will impact
its growth in the dynamic Indian market. It discusses the future of the mobile
subscriber base in India and 3G in greater detail, with special focus on
3G-enabled handsets and MVAS.
Mobile Subscriber Base in India
The Indian
telecom sector registered among the strongest growth rates in the world with
regard to mobile subscription during the last four years. The sector has
surpassed former industry estimates influenced by recessionary factors.
Evalueserve expects the momentum to continue, and the mobile subscriber base in
India to grow at a compound annual growth rate of 10 percent between 2012 and
2016, reaching 1.5 billion by 2016.
The
following are expected to be the drivers of India’s mobile subscriber growth in
the next five years:
Rural
Growth: The rural
mobile subscriber base is anticipated to grow at a compound annual growth rate
of 12 percent between 2012 and 2016, at nearly twice the expected growth rate
of the saturated urban market. It is likely that 62 percent of the new mobile
subscribers added in the next five years will be from the rural market.
Aggressive
Operator Strategies:
The strong focus on subscriber acquisition by operators is expected to continue
in the next five years. Aggressive pricing and innovative targeting strategies
will expand the addressable market for mobile services and reduce cost-based
entry barriers.
Increase
in Multi-SIMing: The
recent increase in the number of multiple SIM users will be the primary reason
for uptake in urban regions. This uptake will be backed by device availability
(dual-SIM phones) and lifestyle preferences (keeping separate SIM cards/phones
for work and personal use or for voice and data access).
Evalueserve expects the dynamism in the Indian telecom industry to continue. In
the future, 3G services will not only be a key differentiator for operators,
but also the next domain for price wars.
3G Subscriber Base
Evalueserve
expects India’s 3G subscriber base to cross the 200-million mark by 2016. The
years 2011-14 will be the take-off period with 3G subscriber growth achieving a
compound annual growth rate of 106 percent. Beyond 2014, growth will slow
because of the introduction of faster technologies, such as 4G and WiMax, and
relative market maturation.
The slow
uptake of 3G services in India in the initial 12 months after service launch
can be attributed to the following factors:
Indian operators
have not actively migrated 2G subscribers to 3G in order to ensure network
stabilization, thereby ensuring that quality of service (QoS) does not
deteriorate. Further, the limited 3G network availability has been unsuccessful
in creating the desired user impact, hence hampering 3G adoption.
Operators
have not been aggressive in pricing 3G services.
Evalueserve sees these problems as mere initial hiccups rather than long-term
challenges.
Outlook
for 3G Services : Drivers
Evalueserve
expects the following factors to drive growth in the 3G subscriber base:
Operators
will address network problems by improving coverage and enhancing quality.
The
improvements in quality and coverage will help operators provide a better
foundation for the aggressive migration of existing 2/2.5G customers to 3G.
Traditionally,
service pricing has acted as a determining factor for subscriber acquisition in
the price-sensitive
Indian market. Evalueserve expects the trend to continue for 3G services.
Reduction in 3G prices by operators will thus reduce the cost-based barriers to
the mass 3G uptake of the technology.
Outlook
for 3G Services : Inhibitors
3G
subscriber growth will slow down after 2014 because of an expected increase in
the prominence of more advanced technologies such as 3.5G and 4G. It is
speculated that the launch of 4G in India will coincide with that in the rest
of the world. In spite of that, Evalueserve expects only a mild success rate in
4G adoption during the initial years, with the technology gradually affecting
the 3G subscriber pie as it establishes itself.
Apart from the above factors, the availability of 3G handsets will also play a
crucial role in determining the success of 3G services.
Outlook for 3G-Enabled Handsets
According
to Evalueserve estimates, 3G-enabled handsets (active installed handset base)
in India are expected to grow at a compound annual growth rate of 41 percent
between 2012 and 2016, to reach 680 million. The estimate was revised in light
of the delay in 3G licensing. The negative effect of the delay is expected to
be relatively feeble in the case of handsets as compared with 3G subscribers.
With time,
handset vendors are likely to focus on adding a wider variety of 3G-enabled
handsets to their portfolio. The availability of smart phones and feature-rich
as well as low-cost 3G handsets has divided the handset market into two
sub-segments:
High-End
User Segment: This
category consists of users who demand high data volumes. Industry sentiments
suggest that the average Indian user is spending more time browsing data
applications as compared with traditional voice telephony channels. With this
trend of shifting from voice to non-voice services , these users are adopting
the best of what mobile technology has to offer, and are high users of advanced
MVAS.
Low-End
User Segment: This
category comprises users who have purchased 3G-enabled handsets, but are
currently not using any 3G plan. This user set represents an important
characteristic of the 3G trend prevalent in India thus far, that of increasing
affordability of W-CDMA-enabled low-cost 3G devices but relatively costlier 3G
services offered by operators. With the trend in 3G services set to follow the
device trend, this user segment is expected to gradually start interacting with
3G services.
While the aggressive promotion given to 3G services and the availability of a
wide range of 3G handsets will drive the uptake of 3G services, the
monetization of 3G will depend on the use of MVAS services by 3G subscribers.
These trends will contribute to the 3G success story in India.
Mobile Value-Added Services (MVAS)
At
present, the mobile business is saturating, as far as the financial returns of
operators are concerned. MVAS has the potential to improve this situation by
monetizing 3G services on small-screen devices. Evalueserve expects the active
MVAS subscriber base to grow at a compound annual growth rate of 28 percent and
reach nearly 430 million by 2016.
The
high-growth MVAS services in the future will be content services (such as
mobile video# streaming, mobile TV
and music downloads), mobile payment and banking services, and mobile gaming.
Each of the high-growth services will have specific growth drivers, as
discussed below:
Mobile
TV and Video Streaming
Increase
in third-party and -Over the Top (OTT)’ partnerships
Availability
of affordable devices that support various video formats
Increase
in content and aggressive content pricing
Improved
data speed
Mobile
Banking and Payment
Implementation
of stringent security protocols and increased public trust
Increased
focus on rural areas
Push from
financial institutions
Launch of
mobile proximity services (e.g. Near Field Communications#)
Music
Downloads
Availability
of low-cost handsets that support all audio formats
Improved
variety and availability of content
Ease of
use in downloading music to handsets
Promotion
of music downloads by operator
Mobile
Gaming
Increase
in youth-targeted content
Launch of
mobile games already available on personal computers (PC) and gaming consoles
(e.g., 3D games, multi-player games)
Increased
focus on -app stores’ by leading telecom operators
Apart from the above mentioned MVAS segments, mobile Internet is expected to
grow significantly in terms of the number of users. Mobile social networking
will be a significant contributor in this regard-Evalueserve expects it to grow
by 28 percent over the next five years in India, strengthened by the
availability of pre-loaded social networking apps and the launch of
social-networking-focused devices. Social services such as m-learning and
m-health, being offered on the mobile platform, form another area that is
expected to benefit from increased speeds offered by 3G. These services are
expected to gain importance as a result of strengthened 3G performance:
m-learning:
These services are
already making steady progress, following an increase in the uptake of portable
devices, and are expected to witness rapid penetration among the mobile
workforce and the student community for instantaneous transmission of
information. This will include the delivery of digital educational content
(documents, web-pages, audio clips and/or videos) via mobile phones.
m-health:
There is considerable
scope for improvement in India’s health care facilities. m-health has
the potential to take audio-visual medical expertise and education to a wider
base. m-health services can facilitate audio-visual expertise, the delivery of
clinical data and health care information, and real-time patient monitoring.
m-governance:
It will make routine
government services available to citizens -anywhere and anytime’. m-governance
services can include access to information and application filling, and
official document submitting facilities. Although at a nascent stage in India,
the Indian government has taken the first step in this direction by proposing
the formulation of a policy framework governing the segment and its usage.
Regulation and compliance to policies, along with the integration of various
departments, will play a vital role in determining the outcome for m-governance
in India.
While MVAS will be a key component of the 3G value proposition, heavy usage and
revenues are also expected to result from big-screen usage (laptops and PCs)
with 3G dongles#.
The Way Ahead
While
operators will push for 3G uptake, Evalueserve expects some key factors, as
listed in the box on the right, to determine the ultimate fate of 3G services
in the country.
The case for 3G success in India is yet to be justified by the market. However,
Evalueserve maintains its optimistic stand on 3G uptake, and expects rapid
growth and an expanded market in the next five years. This will not only
transform the telecom ecosystem in India, but also be a key driver for the
country’s socio-economic development.
By Nitin
Navish Gupta and Smriti Singh
[email protected]
