Mobile Internet users in India to double by 2017, says study

New Delhi: The number of mobile Internet users in India is projected to double and cross the 300 million mark by 2017 from 159 million users at present, a new report by Internet and Mobile Association of India (IAMAI) and consultancy firm KPMG said on Monday.

Though India has low Internet penetration at 19% compared with other developed and developing economies that have up to 90% penetration, the country has the third-largest Internet user base in the world, with more than 300 million users, of which more than 50% are mobile-only Internet users.

“The number of mobile Internet users in India is expected to grow to 314 million by the end of 2017 with a CAGR (compounded annual growth rate) of around 28% for the period 2013- 2017,” according to the report authored by Akhilesh Tuteja, partner and head of the technology vertical, and Ashvin Vellody, partner, management consulting, at KPMG. “This impressive growth would drive India to become one of the leading Internet markets in the world with more than 50% of Internet user base being mobile-only Internet users.”

The growth will be led by the government’s Digital India initiative, collaboration among mobile Internet ecosystem stakeholders and innovative content and service offerings from mobile-based services players.

Digital India is an umbrella programme that encompasses providing Internet access to all by creating infrastructure, delivering government services on the Web and mobile phone, promoting digital literacy and increasing electronic manufacturing capability.

In the 2014-15 Union budget, the government committed Rs.500 crore for building infrastructure, as per the National Rural Internet and Technology Mission, with an additional Rs.100 crore for improving e-governance with the aim to increase tele-density in rural areas.

The content as well as service providers have emerged as important stakeholders for the growth of mobile Internet.

“Meaningful and compelling content can be an important driver for enabling adoption of mobile Internet. Traditional services like voice, SMS are gradually being replaced by mobile data services,” said the report. “Indian mobile content usage is dominated by email, social networking, chat, games and news. While these categories gained popularity because they fulfil multiple needs of consumers, the positive social and economic impact of the Internet is probably manifold,” said the report.

The report said mobile phones were being touted as one of the greatest mediums of change—like giving people without a bank account access to financial services and providing health services in rural areas. “The mobile data services would help to tackle key issues plaguing education, health, finance, agriculture and governance in India,” it said.

On the consumer side, increase in smartphone penetration and increasing demand for Internet-based services such as chat, social media, video and music through the mobile medium will accelerate growth in mobile Internet usage.

India has become the third-largest smartphone market in the world. The number of smartphone users is expected to reach 369 million by 2018.

With the growing number of mobile device connections, India is likely to become one of the largest Internet markets in the world.

While rural India is still catching up with 2G, telecom operators are investing heavily on high speed technologies such as 3G and 4G to tap growing demand in urban India.

The number of 3G subscribers in India is expected to grow to 284 million by the end of 2017 from 42 million at the end of 2013. Meanwhile, 4G user base is projected to grow at an annual growth rate of 344% and a CAGR of 103% from 2013 to 2018.

However, there are challenges in the mobile Internet ecosystem that could impede growth substantially.

Telecom operators are finding themselves cash-strapped in making heavy investment for network infrastructure upgrade due to high licence fees, charges and levies which total up to 28-29% of the total revenue, the report stated.

This is in addition to uncertainties around regulation and policy primarily concerning merger and acquisition guidelines, spectrum management and tax regulations that is adding to the telcos’ woes.

The content and service providers, despite being a source for cutting-edge innovation, also face significant challenges including slower and overloaded telecom networks, experimentation with monetization models and underdeveloped billing and customer care systems.

What perhaps worsens the situation is “limited collaboration between the different pillars of the ecosystem; each component is trying to take the challenges of demand, supply and customer satisfaction head-on by itself”, the report said.

To overcome various challenges, the business models of various companies in the ecosystem would need to be redefined, it added.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.