Smartphone Penetration in India is a Gold Mine for the Telecom Giants
India is not just an emerging market but a great opportunity considering that the year-on-year shipment growth is now over 186% in Quarter 1 2014. That is terrific when compared to China with a moderate growth of just 31%.
With the increasing innovation, competitive pricing and adoption from consumers the share of feature phones is dropping in the country while the smartphone users are increasing at a higher pace. According to the IDC Report, it’s clear that the SmartPhone market is now at around 30% and increasing, all thanks to the budget centric smartphones. The push from giants like Google, who have announced their budget-priced Android One Series is one of those.
What Contributed to this Phenomenal Growth?
When you take a quick look on the market share for the vendors, the primary market is still held by Samsung, followed by Micromax, Nokia along with a few other home grown vendors like Karbonn, Lava, Intex etc. If you take a look at the current market shares, it’s pretty much fragmented unlike a year back when Samsung was primarily the major holder of the market share.
Now the question to why we see this change in the market share? Here are a few interesting points we think attributed to the same.
- Flash Sales – Chinese brands like Xiaomi, OnePlus entered the Indian markets in 2014 and came up with strategies that created demands and then the supply follows. These brands would offer the Smart Phones at a very competitive price and would make the sale online exclusive. That Leads to a lot of attention leading to huge sales though the numbers are not in millions but are certainly impressive enough. Post these flash sales, we have seen a huge interest from the buyers around these Chinese brands and hence there has been a drop in the sales of the brands that were strong in the country earlier.
- More Competition – As mentioned above, we have seen new ways of product distribution which lead into more competition that has brought the prices of the devices move towards the south. More Competition is always good for the consumers since they get many options along with a better price. This is what we can clearly see right now happening in the country with the prices of Sony, LG & Samsung being a bit aggressive to what it used to be two years back.
- Awareness – With the push from multinationals like Google towards projects like Android One, where the idea is more about awareness and adoption of using a Smart Phone. We can clearly see that the share of feature phones is dropping, and consumers are moving towards Smart Phones to at least stay connected with others through the free services like Facebook, Whatsapp, etc. The projection is that the growth would reach to 730 million by 2017 which is phenomenal. [Source]
With all the above mentioned factors, the market is flooded with more sales of Smart Phones which means that more users would be spending their money on the Internet related services be it 2G, 3G or 4G Data connectivity options which clearly is where the telecom networks are cashing in.
According to WSJ :
Bharti Airtel Ltd. , Vodafone Group PLC and Reliance Communications Ltd. all reported profit increases of more than 50% in the three months ended Dec. 31 as their revenue from mobile data fees rose sharply.
These reported profits are increasing even when users are opting for VOIP based calls like Facebook Calls, Skype, Whatsapp Calls etc because end of the day what’s most required is an Internet Connection and the need to stay connected always. Currently in India, you have several phones available which are priced below $100 and while using which the user can opt for data packages in very small doses like the ones from Airtel & Vodafone where they can pay as they use with options like Rs 11 for 50Mb which is relatively pretty low cost comparing to buying a computer and an internet connection.
We can conclude that once 4G is available all over the country, these telecom operators would be cashing in from these trends especially the fact being that the adoption is going to increase year on year.