Mobile in India: A Business Overview -- Levi Shapiro

Suneel Bandhu , former COO of Indian wireless carrier Tata TeleServices, is in Israel this week to present atAxis Tel Aviv. Suneel is a Partner inMumbai Angels. Inspired by the success of InMobi, Mumbai Angels’ first investment (now valued at over $1 billion), Suneel is seeking potential investments in Israeli mobile technology startups. The market dynamics in India’s telecom sector suggest a genuine opportunity for Israeli startups.

From a modest $200 million in bi-lateral trade in 1992 (when diplomatic relations were established), India-Israeli trade surpassed $6 billion in 2012-13 . This number is projected to double with the passage of a Free Trade Agreement . Despite the momentum with India, Israel-China (including Hong Kong) trade is on-track to hit $10 billion this year, representing 13% of total Israeli exports (Bank of Israel). Take a look at why, in the mobile sector, at least India is the better choice.

Indian Market at a Glance :

- 150 million mobile Internet connections

- 250 million Internet users

- 25-30 million 3G customers

- Mobile Data usage on the Network growing 14-15 % QoQ

- Mobile Data ARPU is 60-70 Rupees per data user

- Mobile Data usage is approximately 200 MB per data customer

- Mobile Data realization per MB is Re. 0.30

- Mobile Data as a percentage of total revenue is about 7.5%

Youthful Demographic :

India’s high birth rate, in contrast to China’s one child policy, means a young demographic. More than half (51%) of the population is under 25 and two thirds (66%) are under 35. By 2020, the average Indian will be 29, versus 37 in China.

Smartphones -- Local Players Dominate:

India is the world #2 wireless market, with 900 million wireless users. Only 70 million currently have smartphone devices, but that number will soar to 250 million by next March. Nearly all of these (92%) are Android devices. Samsung is the market leader, with 26% market share. However, entry-level handsets from local manufacturers like Micromax, Karbonn and Lava are booming, swallowing 40% of the market. Expect to see more of these brands in the West. Other foreign OEMs, witmarkh et shares in the 4-5% range, include Sony, Nokia, LG and HTC.

Apple has a very limited market presence in India, due to high price and limited distribution. India was a major market for Blackberry (like Indonesia), but the youth segment abandoned RIM for Android. Feature phones such as Nokia Asha still sell very well in the rural and semi-urban markets, largely because of the brand’s historical leadership, after-sales service and durability.

Rapid Transition to Data Services :

India’s mobile services market is more than US $30 billion per year, placing it in the Top 10 globally. Data services currently contribute only about 8-9 % of revenue for mobile operators, versus 52% in the US. This will grow rapidly with the population of first time internet users, accessing Internet via handsets on mobile data networks.

Both GSM and CDMA mobile systems are deployed, though CDMA is declining due to limited devices. 3G services are available across major cities and towns. 4G services are currently available in four cities through Airtel. A new service provider, Reliance Jio, is seeking to disrupt the mobile data services business, through a soon-to-be-launched nationwide 4G service supported by a mix of content, applications and services.

Fierce Competition Among Wireless Carriers :

In mature economies, the mobile sector is usually highly concentrated, with 2-4 players. India is actually fragmented. The largest player is Airtel, with a revenue market share of 31%. The next largest carriers are Vodafone, Idea, Reliance, Tata Teleservices, Aircel, MTNL and BSNL (both majority government owned), Uninor, MTS, Videocon and Loop Mobile. This competitive environment helps reduce consumer fees, enabling mobile data Average Revenue Per User (ARPU) of only 60-70 Rupees per month (USD .98- 1.15).

Content -- Bollywood, Sports and RingBacks :

India may have 150 official languages, but when it comes to content the sub-continent speaks only Bollywood and cricket. This week’s t20 World Cup Cricket Championships are expected to spur millions of Indians to adopt mobile value-added services.

Caller Ring Back Tone (CRBT) is the largest revenue generating value-added service. Users typically pay US 50 cents monthly for the service and 20-30 cents per month per song in their ring back tone library. The penetration of CRBT is almost 8-10 % of the subscriber base among different mobile service providers. CRBT payments are made through the phone bill. E-commerce and m-commerce is a fledgling business that is poised to grow rapidly, with the Cash on Delivery model integrated as an alternate payment mechanism.

In addition to e-mail, Facebook, Twitter and YouTube are popular applications used by smartphone owners. Messaging has been a dominant application for data services, with a prevalent culture of chat as well as forwarding of jokes/memes among groups. Facebook is seeing reduced Minutes of Usage among the young, who are migrating to communications apps like Tumblr, Pinterest, Reddit, Vine and Snapchat.

Some Israeli companies, such as Comverse, Gilat and Kaltura, have built profitable businesses in India. I hope to highlight future Israeli-India success stories during my upcoming sixty minute Keynote at the India Gadget Expo , June 19-22 in Hyderabad . If your company is interested in showcasing your technology to an audience of Indian technology buyers, contact me for a possible five minute interstitial.

Levi Shapiro is a Partner at TMT Strategic Advisors, a research and strategy firm focusing on thetechnology, media and telecom sectors. He can be reached at levi@tmtstrat.com or via twitter: @levshapiro

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