Why 3G mobile Data is Lagging SmartPhone Adoption in India ?

3G in India vs SmartPhone AdoptionMobile phones have increasingly become more than a communication device – 40% of the respondents in a survey across urban/ semi-urban and rural areas claim that it is currently their primary means of entertainment. While people are upgrading their phones to smartphones and increasingly using their phones to watch videos, listen to music or take photos, having a smartphone does not equate to having a mobile data plan yet. People quite frequently buy pirated content (videos/ music) from local retailers; which is then shared among friends. Moreover, the rise in the number of people that have smartphones, but no data subscription is leading to the growth of offline market of apps and content for smartphones. Firms like Shot formats and Apps Daily are tying up with local mobile retailers to sell apps and content offline for as low as Rs10.

Price is still the most important criteria for choosing a handset by the price sensitive Indian consumer. Entertainment options (radio/music/video/games) are the 2nd most important consideration for 20% of the respondents. In contrast, only 8% ranked the ability to access the Internet/ apps as the 2nd most important criteria.

Why 3G Data Services still not gaining Traction ?
There are currently ~200m internet users in the country with ~85% using mobile data. While growing rapidly, data usage remains largely an urban phenomenon – survey highlighted that 80% of the rural respondents still do not use data v/s 31/20% in semi-urban / urban areas.

While rising affordability of smartphones and falling data tariffs is increasingly making the landscape more conducive for mobile data adoption, the third pillar of the data ecosystem – ‘demand’ still lacks vigor. Do not feel the need for it – was the reason given by 63% of the respondents for not subscribing to a data plan. 2G is good enough for my needs – was the reason given by 31% of the respondents for not subscribing to 3G.

We believe the key lies in the usage patterns of these people. All the popular applications viz. email, social networking, messaging apps (penetration of ~60-80%) work well on a 2G connection. Moreover, these applications are not very data intensive. The data-intensive applications that require a 3G connection such as video streaming or online mobile gaming are still relatively underpenetrated.

We believe that the demand for data-intensive applications will follow the adoption of 3G, rather than the other way round. This means that subscribers are likely to consume more data once they have the relevant application, smartphone and a network connection that supports data-intensive applications. We believe the operators will need to do the following – Operators will have to be proactive in ‘creating’ the demand / need for mobile data by creating awareness about data, benefits/uses of mobile Internet as well as collaborate with app developers to build relevant apps in the Indian context and Converge 2G/3G rates and increase coverage rapidly to even smaller towns and then cover villages as well.

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