India boasts the second highest number of mobile subscribers of any country worldwide – testament to the technological transformation that has spread across Indian society over the past decade. The country is also now the world’s second largest smartphone market, having overtaken the US in the first half of 2016. The country is now seeing an accelerating move to 4G, with nearly half of the connection base forecast to be running over mobile broadband networks by 2020.
India market overview
At the end of June 2016, 616 million unique users subscribed to mobile services in India, making it the second largest mobile market in the world. Almost half the country’s population now subscribe to a mobile service. Improving affordability will help deliver over 330 million new unique subscribers by 2020, taking the penetration rate to 68%. India is now also the world’s second largest smartphone market, overtaking the US in the first half of 2016, with an installed base of 275 million as of June 2016.
The last few years have seen some recovery in financial performance for the sector overall, but competition has kept effective price per minute and ARPU per subscriber levels at amongst the lowest in the region. Operators have made capex investments worth INR154,100 crore ($23 billion) over the last five years, a figure forecast to increase sharply to total around INR227,800 crore ($34 billion) for the period to 2020. Operating cashflow margins in India stood at just over 12% in 2015, well below both the global and regional averages.
In 2015, the mobile industry was responsible for 6.5% of India’s GDP, a contribution that amounts to more than INR9 lakh crore ($140 billion) of economic value added. Mobile operators and the ecosystem provided direct employment to approximately 2.2 million people in India across both the organised and unorganised sectors, while approximately 1.8 million jobs were indirectly supported. The mobile ecosystem also makes a highly significant contribution to the funding of the Indian public sector, with approximately INR1.4 lakh crore ($21 billion) in 2015.
In value added terms, we estimate that a total economic value of INR14 lakh crore will have been generated by 2020 in the form of salaries, profits and tax payments. The total number of jobs directly supported by the ecosystem will also grow significantly in the period to 2020 to approximately 3 million, with an additional 2 million indirect jobs also supported by 2020.
The Indian government’s Digital India initiative was launched in 2015 and aims to use the potential of digital technologies to address some of the significant socioeconomic challenges in the country. Mobile networks and the broader mobile ecosystem are helping to address the goals of Digital India. A new regulatory regime for mobile money should help accelerate moves to improve financial inclusion in the country: four of the eight licensees for the new payment banks are operator led.
Mobile is already the dominant platform for internet access and will play a pivotal role in delivering the Digital India vision of broadband as a utility for every citizen. As of mid-2016, around 430 million had access to mobile internet services, a figure that will increase to almost 670 million by 2020. This is equivalent to around half the population but will still leave India trailing the regional average of 63% penetration.
Digital India’s ambitious goal is universal access to online services, but there is still a long way to go. In addition to the work of operators to expand and improve networks, significant efforts from government and the regulator are needed to create the right conditions for continued investment.
Review and reform in key areas can accelerate mobile broadband access and adoption across the country. A deep assessment of the regulatory framework is required to more accurately reflect the dynamics of the digital economy, rather than perpetuating an outdated view of the sector. It is also important that the costs, barriers and administrative processes that delay network deployment are reduced. Finally, spectrum policy and pricing play a crucial role in achieving the country’s goal of broadband access for all.