Smartphone adoption in India is increasing at a fast pace, driven largely by device affordability and the growing relevance of devices in daily lives. At the same time, the mass adoption of 4G across the Asia-Pacific region has led to a steep fall in the prices of long term evolution (LTE) components and consequently LTE devices. The two factors coupled with Indian telecom operators’ accelerated 4G roll-outs are leading to radical changes in the Indian smartphone market.
A recent research paper by Kotak Institutional Securities tracks the key developments in the Indian 4G market, which have helped improve the ecosystem for data-led services. The following are the key trends that mark the development of the 4G ecosystem in India…
Growing adoption of smartphones
Around 42 per cent of the total mobile phones shipped to India in 2015 comprised smartphones as compared to 10.8 per cent in 2011. During the same period (2011-15), the total smartphone shipments grew at a compound annual growth rate of more than 50 per cent. This can be largely attributed to the increased availability of affordable smartphones and the growing relevance of devices in day-to-day lives.
Further, 4G devices are gaining traction with sales to end-users growing about 5x in 2015 as compared to about 27.4 million devices (or 10 per cent of the overall sell-throughs) in 2014. A key driver for this growth has been the steep decline in the cost of 4G devices, which, in turn, has been facilitated by economies of scale achieved by handset manufacturers through large-scale 4G adoption in several large Asian markets. Another important growth driver has been the accelerated 4G network investment push by incumbents.
4G-enabled smartphones at lower price-points
It is now possible for an Indian consumer to purchase a 4G-enabled smartphone for as low as Rs 3,999 (price of Phicomm Clue 630 on Snapdeal after a 20 per cent discount on the maximum retail price of Rs 4,999). There has been a sharp decline in the prices of 4G handsets in the past six months. While the most economical 4G smartphone was available for Rs 7,000 in September 2015, today, about 15 smartphones are available for less than Rs 5,000.
As per estimates, almost 10 per cent of the phones available in the market are 4G enabled. Of these, about 70 per cent are priced above Rs 30,000, around 50 per cent are priced between Rs 20,000 and Rs 30,000, about 30 per cent fall in the Rs 10,000-Rs 20,000 price range, nearly 15 per cent are priced between Rs 5,000 and Rs 10,000, and less than 1 per cent of these phones are priced at below Rs 5,000.
The dominant LTE bands supported by these 4G-enabled smartphones are FD-LTE 1800 (Band 3) and TD-LTE 2300 (Band 7), some of them also support FD-LTE 850 (Band 5). According to Nokia’s latest mBit index report, a good proportion of LTE handsets (around 54 per cent) also support the LTE-900 band. This provides the incumbents an option to refarm their liberalised 900 band spectrum for LTE in the medium term.
Enabling device and network ecosystem
Though the underlying trends of affordability and end-user sales are promising, these may not directly lead to higher actual usage of 3G/4G services. A case in point is that Idea Cellular had 55.5 million 3G/4G smartphones users at the end of December 2015 but only 21.2 million 3G/4G users, a mere 38 per cent of the total. This is one metric that should improve going forward, driven by an expanding content ecosystem, increasing consumer awareness, improving use cases and a further decline in device prices. We remain positive on the India data growth story.
Rapid reduction in 4G smartphone prices
Smartphone penetration in the country is increasing at a fast pace owing to the increasing availability of affordable smartphones offered by a number of local and Chinese manufacturers. The economies of scale are enabling 4G chip manufacturers to produce components at a much lower rate, thereby resulting in a sharp fall in the prices of 4G smartphones.
The steep reduction in the prices of 4G devices across the Asia-Pacific region along with the impending entry of Reliance Jio (R-Jio), made Indian operators take notice of the rapidly evolving 4G device ecosystem. As a result, during the second half of 2015, operators started making aggressive investments in rolling out network infrastructure for high-speed broadband data services, especially 4G. Device manufacturers have responded with increased 4G device launches while also pushing the envelope on lower price points.
4G device market in India
On account of affordable 4G devices, which have flooded the Indian market, it is now possible to buy a smartphone for as low as Rs 4,000 with features such as 5 inch screens, 1.1 GHz quad-core processors, 8 GB internal memory, 5 megapixel cameras and 2,300 mAh Li-ion batteries. An interesting point to note here is that all the models listed in the accompanying table support both FD-LTE 1800 (Band 3) and TD-LTE 2300 (Band 7) while only some of them support FD-LTE 850 (Band 5). The list also includes R-Jio’s Lyf Flame 1 smartphone, which is available in a Rs 4,999-Rs 5,599 price range across different online platforms. In addition to Flame 1, R-Jio has launched four other smartphone models – Wind 6, Water 1, Water 2 and Earth 1.
Almost 70 per cent of the phones priced above Rs 30,000 are 4G-enabled while less than 1 per cent of the total handsets priced below Rs 5,000 are 4G-enabled. Overall, about 10 per cent of the total phones available in the market are 4G-enabled. The predominant LTE bands supported by these 4G devices are FD-LTE 1800 (Band 3) and TD-LTE 2300 (Band 7).