From being voice-hungry, Indian mobile phone users have now turned data-hungry cutting across income and age profiles. According to market research firm Nielsen’s survey on handset consumers, the appetite for data consumption has risen over the last 15-18 months. While earlier consumers were consuming 4 GB data a month, today their consumption is as high as 1 GB a day. Though Nielsen has not mentioned it, the period of data explosion coincides with the entry of Reliance Jio which changed the way telcos charge for services — voice has become free and data is priced and here, too, rates have come down drastically.
Today, every mobile operator provides bundled voice and data packs and the 1 GB-a-day offer has become standard. With so much of data at their disposal, what are the consumers watching? Nielsen’s findings show that as far as the usage of apps goes, chat, video-streaming, browsers, social networking and image apps are the most engaging and account for more than 50% of the total time spent on smartphones.
A comparison across price bands reveals that except for browsers, the time spent on these categories is much higher among users of smartphones priced over Rs 15,000. A striking difference in engagement levels is apparent for image and social networking apps where the time spent by premium handset users is higher by 4 times and 2 times, respectively, Nielsen has observed. When it comes to individual apps, WhatsApp messenger is the most engaging app across users of all three price bands — entry level, middle level, and premium handsets.
“However, we do see differences when we look at usage of some other popular apps. Basic apps like Facebook Lite and UC Browser that save space in comparison to full-service versions, are usually pre-installed in less expensive handsets to facilitate ease of operation. Hence, for users of smartphones priced under Rs 15,000, the time spent on apps like UC Browser, Facebook Lite, and YouTube is relatively higher than users of higher-priced devices.
For users of smartphones priced over Rs 15,000, the highest engagement occurs on apps that consume a lot of data, like Facebook, WhatsApp, Instagram and Google Chrome,” Nielsen has noted in its survey. Nielsen has categorized entry-level phones as those which are priced within the Rs 5,000 level. Mid-level phones are priced between Rs 5,000-15,000, and premium handsets are the ones which are priced between Rs 15,000 and Rs 25,000. The survey has noted that despite the availability of economically priced smartphones, average smartphone prices are still increasing. According to Nielsen, the average cost has steadily risen from about Rs 7,700 in 2015 to about Rs 10,000 in 2017.
“We attribute this to the fact that a high proportion of smartphone users continued buying premium handsets which are packed with better features and offer higher performance. We expect the trend of the influx of value-for-money handsets and the increase of average smartphone prices, to widen the profile of smartphone users. It will also change the way people use their smartphones,” Nielsen has stated.
Paradigm shift in Indian mobile data usage
The Indian market witnessed a paradigm shift in data consumption, with 4G traffic capturing 82% share of total data traffic in December 2018.
So concludes the latest edition of Nokia’s Mobile Broadband India Traffic (MBiT) Index 2018. Nokia MBiT Index is a report on mobile broadband performance in India. It aims to provide valuable insight, data and analysis on mobile broadband and traffic growth in the country by co-relating these trends with various demand and supply-side drivers of the connectivity ecosystem. These include variables such as handset and device numbers, content, subscriber usage patterns and network investments by mobile operators.
The latest edition of the report focusses on the following for the year 2018, and expected trends in 2019:
- Pan-India and Circle-wise Mobile Data Trends
- Data consumption patterns for 3G and 4G and type of content consumed
- Current device ecosystem for 3G, 4G and VoLTE devices in India.
As well as the paradigm shift in data consumption, takeaways from the report include:
- A significant increase in data consumption with 4G usage reaching ~11Gbytes/user/month
- Overall data traffic grew 144% in 2018, driven by surge in 3G and 4G data consumption. Access to high-speed 4G internet increased appetite for overall data consumption in the country
- 3G data grew 286% in 2018 against 25% in 2017, driven by increased appetite for data consumption and better coverage
- Video contributed to a 65% to 75% share of mobile data traffic; within video, OTT usage is driven by cheaper data plans, and launch of locally relevant as well as original content
- In 2018, Hindi and regional languages comprise >90% of popular videos watched on YouTube India
- Driven by availability of affordable devices, 3G and 4G device base grew 1.1 times and 1.7 times respectively
- VoLTE handsets achieved scale with an estimated base of 162 million.
- The MBiT Index has been created based on Nokia’s analysis of data obtained from various sources. It analyses mobile broadband traffic trends only at a consolidated level, and does not intend to provide any comparative analysis of data growth of different operators.
India has turned the largest data consuming country
With consumption of 150 crore gigabytes of mobile data per month, India is now the number one country in the world in mobile data consumption, NITI Aayog CEO Amitabh Kant said. “Amazing! With 150 crore gigabytes per month of mobile data consumption, India is now world’s number one mobile data consuming country. Its mobile data consumption is higher than that of the USA and China put together,” Kant tweeted.
However, he did not share the source of the data. Earlier Ookla said India is ranked 109th – behind countries like Nepal and Sri Lanka – in mobile Internet speeds and 76th for fixed broadband speeds globally “At the start of 2017, the average mobile download speed in India was 7.65Mbps. Heading into the end of the year, average mobile download speed is 8.80Mbps as of November. That’s a 15 percent increase,” Ookla said in a release announcing the results. “While mobile speeds increased modestly, fixed broadband speeds increased dramatically. Average fixed broadband download speed in January was 12.12Mbps. As of November, it’s at 18.82Mbps, a close to 50 percent jump,” it added.
As of November, Norway ranks first in the world for mobile Internet speeds with an average download speed of 62.66Mbps. Singapore takes the top spot for fixed broadband with 153.85Mbps average downloads.
Data generating more traffic than voice
Telecom consumer behavior is moving towards higher data consumption. From streaming videos to using social media or chat-driven apps, data is expected to be the key growth driver in the telecommunications industry in the years to come. Interest in video streaming is growing and the ability to watch live broadcasts of user-generated and professional content on existing apps has also increased the appeal of live streaming. The pricing and go-to-market strategies used by telecom operators reflect this trend, as operators shift from devising voice call tariffs to data-driven pricing. Increasingly, data is generating far more traffic than voice calls.
By 2022, the voice over LTE (VoLTE) subscriber base in India is pegged to reach 370 million. According to Nitin Bansal, head, network products, Ericsson India, “VoLTE presents a great opportunity for operators in India, who are looking to route voice calls over 4G LTE networks, enabling a lower cost per minute for voice calls and freeing up legacy spectrum bands for reframing.”
More telecom towers needed to cater to the rising data demand
Despite a consolidation in the telecom sector, India needs around 100,000 additional towers to take care of the growing data and voice requirements. The country currently has about 461,000 mobile towers for a customer base of 1.18 billion. The world’s second-largest telecom market is undergoing consolidation with operators either merging with larger players or closing operations altogether. Tower companies, which lost thousands of co-locations per tower leading to drop in revenues, too are seeing the impact of consolidation. Due to the changed scenario in the sector, Bharti Infratel and Indus Towers last month announced a merger creating the world’s second largest tower firm.
However, if the figures are compared to China, which is the world’s largest telecom market, a totally different picture emerges. China has over 1.94 million telecom towers for a customer base of 1.4 billion. China Tower Corporation alone has about 1.9 million towers and the remaining 40,000 to 50,000 towers are owned by smaller firms. In contrast, the merged entity of Bharti Infratel-Indus, which is the world’s second largest tower company after CTC, will have a portfolio of 163,000 towers.
India lags far behind China in terms of investments too. Sectoral regulator Telecom Regulatory Authority of India (TRAI) has been raising the issue of insufficient investment in infrastructure as the reason for call drops, a charge refuted by telecom operators. The upcoming National Telecom Policy aims to garner an investment of $100 billion in the telecom sector in five years. “We did a comparative benchmarking with China, which has consistently spent $70 billion on telecom infrastructure per year for the past many years. We have invited $100 billion in five years. In my view, $100 billion is actually a slight underestimation. If we really want to create next-generation infrastructure, India must create a framework where we can have significant investments coming into the sector,” Telecom Secretary Aruna Sundararajan said recently.
The telecom sector in India has a huge scope for growth as the country has touched only 30 per cent broadband penetration and 70 per cent of the growth still remains to be tapped. With the expansion of 4G, 5G, Artificial Intelligence, Virtual Reality, Internet of things and M2M etc, the country is set to witness a multi-fold growth of data which will necessitate the installing around 100,000 mobile towers across the nation in the near future,” Tilak Raj Dua, Director General, Tower and Infrastructure Providers Association (TAIPA) said. Dua added that India extends telecommunication services to more than 1.1 billion subscribers through 461,000 mobile towers, mounted with around 1.8 million base tower stations (BTSs), as of May 2018. Approximately, 90 per cent of these total mobile towers are shared among service providers.
“While in China, there are over 1.9 million mobile towers (as per the tower exchange data), we believe, out of the total only around half a million mobile towers are shared among TSPs. The sharing of mobile tower companies in China have recently realized the significance of the sharing model, emulating the Indian success story”, Dua added. In India, the sharing concept started in 2005. Under the sharing concept, the towers are shared on a non-discriminatory and transparent basis. The concept has advantages such as efficient use of capex, improved aesthetics, faster rollouts, energy savings, and better coverage quality. “India is the first market to develop and adopt this model, after which it has been emulated globally and is a Harvard business School case study,” Dua signed off saying.
Rise in data usage calls for govt.’s special plans
On the one hand where the lawmakers might have been less focused on forming rules and regulations over internet services vis-a-vis voice services, the telecom operators on the other — as made clear by the ongoing spectrum auctions — have placed huge bets on data operations, especially on back of declining voice usage.
“It’s not because of pricing or elasticity that minutes are coming down. India is the lowest when it comes to tariffs, and on a consolidated basis, the debt is almost two times the revenue. You look at the balance sheets of these companies, there is no scope for a further fall in average realization per minute on voice,” said Prashant Singhal, global leader for telecom practice at EY. Average realization per minute is a metric that telecom companies use to understand the profit realized on every voice minute used on its network.
Despite data traffic inching into the territory of voice usage, it is likely that in the years to come, due to introduction of newer technologies such as 4G-LTE, and a possibility of internet telephony kicking in, it is expected that mobile internet would expand the revenue pie of the telecom companies. “Younger people are now talking less and texting and messaging on services like WhatsApp, etc. more. As internet usage is rising, people are finding lesser reason to make a voice call. Going ahead, the data revenue will comprise a larger proportion of telecom companies’ total revenue, but it doesn’t mean it will become the predominant source of revenue, which is voice,” said Mahesh Uppal, director, ComFirst India.
While the overall pie of revenues for telecom operators continues to expand, in terms of average revenue per user (ARPU), a key metric for telecom companies, the ARPU earned from mobile data traffic has started eating into that from voice traffic, and even though with rising competition in the sector, the data tariffs are expected to go down, the cannibalization of voice ARPU is not likely to reduce.
“The recent rise in data average revenue per user will soon start to reverse and cannibalization by data services will continue to reduce voice ARPU,” Fitch Ratings had said in a recent report. An analyst with a leading consultancy firm said that telecom operators may not see falling voice revenues as a reason to reduce tariffs and push up voice usage in terms of volumes, the competitive pressure being faced by the companies, could mean good news for the consumer.
Concurring with the argument, Uppal said: “There is no doubt that there is pricing pressure on the operators but the tariffs of the operators are largely determined by the market. If one operator offers voice services for free, another operator would have to match that offering to stay in the business. The issue is not whether there is scope or not; if there is competitive pressure, and if one company decides to use voice tariffs to expand its market share, other operators don’t have any option but to reduce their prices.”
Fitch said that to respond to Reliance Jio’s data only plans — which could be “particularly disruptive, given that most incumbents still derive the bulk of their revenue and profit from voice and text messages” — incumbent operators may lower their own tariffs to retain customers. “We expect the industry blended tariff to fall by 10 per cent to 15 per cent in the next year.” Fitch said.
Going forward, the data consumption in the country is only expected to grow manifold, and will continue to be one of the major causes of declining voice usage per subscriber. However, it is believed that despite several operators betting big on data services, voice revenues will continue to dominate the earnings of these companies in the near term.
Cheap data resulting in huge smartphone replacement demand in India
The availability of affordable handset prices and cheap data cost have resulted in a huge replacement demand for smartphones among the young and aspiring customers across segments, Nielsen Indi a’s findings revealed. The findings said that despite the availability of economically priced smartphones, average smartphone prices are still increasing. The average cost has steadily risen from about Rs 7,700 in 2015 to about Rs 10,000 in 2017. “The advent of the high-speed 4G internet, less-expensive mobile handsets and a correction in call data charges have encouraged the speedy adoption of smartphones. To meet the demand of the mass market, new Chinese and Indian handset makers have launched affordable handsets, which are under Rs 5,000,” Abhijit Matkar, Director -Technology IPG – Nielsen India, said in a statement.
“This sudden influx of affordable smartphones created a whole segment of new consumers who either upgraded from feature phones or were new mobile user’s altogether.” Matkar added that the price of handsets and data is emerging as a remarkable surrogate for monitoring the ever-widening set of users and their smartphone usage, thereby facilitating business and marketing strategy for a better return on investment (ROI). Nielsen, in its report, said that there is a strong correlation between the amount of time people use their handsets and the evolution of the usage. “Half of India’s entry-level users are between 15 and 24 years old, mostly students, and can be assumed to be data-hungry, though less affluent than premium handset owners. Among premium handset users, 60% are over 24 years old, primarily working professionals or self-employed. These users are usually affluent and data-hungry,” it said.
Phone users in the country are consuming 1GB of data a day on their smartphones, a huge leap from the erstwhile average of 4GB a month, according to findings. The user habits of Indian smartphone users highlight that users across the segments (entry level, mid and premium) spend more than 90 minutes a day on online activities while the premium segment takes the usage up to 130 minutes per day.