Mobile Internet – Emerging trend but lacks demand, holds growth of 3G

Majority of Indian urban subscribers access Internet at their homes / offices using a wireline connection. Mobile Internet (2G/3G) is the second most preferred option, ahead of cyber cafes. 33% of the respondents use mobile phones to access the Internet when their first preference is not available. The most popular applications are the less data heavy email, web browsing and social networking.

3G uptake has been lackluster in the urban areas and has little/no subscriber awareness beyond the urban areas. Lack of opinion about quality of 3G/data services of various operators among a large fraction of urban subs also points to the current disinterest for data.

Handset affordability and data pricing are constraints but the biggest impediment that is revealed by the survey is the lack of a need to use 3G. Affordable 3G handset was the constraint. The incremental cost of 3G outweighs the incremental benefits (read higher speed). We believe that the pricing gap between EDGE and 3G needs to converge to prevent price arbitrage before any meaningful pick-up can happen.

For data/3G demand to pick up, an increase in data heavy applications i.e. online gaming, music and video streaming/ downloads is critical. This means that generation of local relevant content will be critical for a data pick-up.

The Indian Youth aspire for smartphones for Internet, social networking and chatting. The upgrade cycle however will be gradual. The replacement cycle is still stretched at ~ 2years.

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