|
A paid 🔒 weekly email that explains the key changes in business, technology and finance in India in the last seven days. In a way you will never forget. Did someone send you this? Register here
|
|
Good morning dear reader, One of the outcomes of the Great Financial Boom of 2021 was that we finally understood the natural limits of the Indian internet market. As longtime readers know, I’ve written about two of these: First, there are the California users of India, which have about 10 million userswhich are the main drivers of our internet economy. That time, I wrote how the number of active online shoppers in India is the population of Swedenand why all the consumer internet companies are fighting for these users. Second, there are about 10,000 software engineersWHO represents breadth and depth India’s quality engineering talent. Remember, companies threw everything from international world championship tickets to BMW bikes to get hold of these engineers, only to fire most of them immediately after a year.
Limitations become apparent when there is excess. It happened in 2021. Everyone made a lot of money and suddenly they were looking for online buyers (to buy their products) and developers (to manufacture their products). As a result, we learned that both of these resources are much shallower than we thought.
But limitations are also known when the opposite happens, that is, when there is extreme scarcity.
Over the past two years, almost every technology sector globally has seen an increase in demand, which has led to increased production on the back of cheap capital. With one notable exception. Smartphones. Due to a shortage of components, especially at the entry level, the product launch was delayed, which led to reduced inventory and ultimately led to a decline in smartphone sales. This led to global supply chain disruptions, followed by geopolitical tensions involving China, Taiwan and the United States. Consequently, we now know another limit. Here it is. |
|
|
In nearly half a decade, India has added mobile data users at a breakneck pace — users who have shaped the engine of the country’s digital economy. This growth was the main reason for investing huge resources to create infrastructure for services such as payments, travel and commerce. Since the beginning of 2021, the number of mobile broadband users in India has decreased. As of October 2022, the most recent month for which data is available, that number was 789 million users – the same as in August of the previous year. This figure is consistent because it reveals deeper, more consistent limits. Let’s go inside. |
|
|
Smartphones may be the answer, but what is the question? |
|
|
First, let me say that there are few things more complicated than setting up an internet connection in India. You’d think it’s simple, but it’s not. Internet access operates on a spectrum and depends on three broad capabilities: device, telecommunications, and access speed. You can have a feature phone that offers 4G connectivity or a smartphone with 3G coverage. Then, orthogonally to all this, the Telecom Regulatory Authority of India (TRAI) counts mobile device users with a broadband connection, which it defines as a speed of 512 kbps (and recently recommended a change to 2 Mbps). It receives this number from various operators around the country and publishes a monthly report, which is where the table above comes from. Add to that the fact that a user can have multiple connections and things get messy very quickly. Because the definition is so fluid, it has been used to make some bold claims. For example, about a decade ago, before Jio existed and mobile phones were ubiquitous, Pankaj Pachauri, then Communications Adviser in India’s Prime Minister’s Office, used TRAI data to claim 485 million broadband users. In India. |
|
|
This was, of course, an absurd guess. But my point is that official data can be used to make false claims like this. Fortunately, our understanding has advanced significantly over the past decade. Despite our arguments about the exact definition, it is generally accepted that the number of users with internet access in India is around 800 million. But now this number has decreased. Vanita Kohli-Khandekar, columnist and author Business Standard, was the first to report this development. He attributed this to the rising cost of entry-level smartphones in India, which, according to his analysis, was the biggest reason behind internet growth stalling in India. |
|
|
There are other signs that this is true. Smartphone sales in India have declined, especially at the entry level. When the economy is not good, people tend to keep older phones longer. Also, like cars, the second-hand market tends to heat up considerably. Cashify, a startup that sells used phones, reported a 50% increase in revenue in 2022 compared to the previous year. Smartphones explain a lot. It makes sense. But they don’t explain everything. Along with mobile broadband users, TRAI reports the number of wireless subscribers, especially mobile phone users, in the country every month. Smartphones. Feature phones. Everything. In its latest report for October last year, TRAI put the figure at 1,144 million users. It was more or less the same in September. Back to January. Still the same. If you go back a full year, to January 2021, that number was slightly higher, at 1.159 million users. But essentially, it turned out okay. Apparently, this is a natural limit. So I went to TRAI’s website and went back month by month trying to figure out how long this trend has been going on. After some analysis I finally got my answer. January 2017—1.151 million users. Five years. For half a decade, there has been almost zero growth in the number of mobile phone users in India. So, while India’s mobile internet users have stopped growing in the last year, there is a deeper trend – India’s mobile users stopped growing long ago. About 88% of these connections are active, Trai says. That leaves around 400-500 million Indians who can’t even afford a feature phone that retails for under $10. Of course, this likely includes children and senior citizens, but even with that in mind, it’s clear that this is a natural threshold that India won’t cross for a long, long time. If this is true, it means that the future growth of mobile internet users in India should come from within these approximately one billion mobile users. The pie has stagnated for the past five years and is not going to grow again. All we can do is try to find out what it takes to convert more of these mobile phone users to mobile internet users. But what will it lead to? Is it just smartphones? In the GSMA’s annual state of mobile internet connectivity report, they identify two ways people stay disconnected. Either they live in an area without mobile broadband coverage (coverage gap) or they live in an area with coverage but no mobile broadband (usage gap). Here’s how all the world’s regions stack up. GSMA does not provide a breakdown by country, but it is fair to assume that India is the leading contributor in South Asia. |
|
|
Basically, in percentage terms, apart from Sub-Saharan Africa, South Asia is the region with the least number of connected users and the largest coverage. This shows that there is an opportunity to move users to the mobile internet. But are smartphones the answer? See, this is the chart we’re looking for. |
|
|
It’s pretty obvious. For starters, I was quite surprised to note that South Asia has such a high proportion of 4G/5G smartphones (which is probably driven by Jio). In fact, in terms of interest, it is more affordable than Europe and not far from developed markets like East Asia. To be fair, it also shows that 27% of those users are on feature phones or feature phones. This is a high rate and an opportunity, but not dramatically higher than, for example, other regions. All this shows that while smartphones make a difference, there are a significant number of users who already own a 4G smartphone, but yet they are not connected. But why? For the most obvious reason – they can’t afford it. A large number of Indians probably own subsidized smartphones (again, Jio), but with rising tariffs and other economic pressures, they don’t. use it capabilities of their smartphones. So making more smartphones is only part of the answer. If India needs more mobile data users, it needs to raise revenue levels. Cheaper smartphones will help, but only up to a point. Again, this is confirmed by other signals. There are about 630 million smartphone users in India. How many of these users are online for basic activities like social media and messaging? Well, see Comscorethis number is about 485 million users. This is the figure claimed by Pankaj Pachauri as the number of internet subscribers in India a decade ago. So at least one According to official estimates, India’s internet users have been flat for more than a decade. That makes it hellish. |
|
|
|
Take care. Sincerely, |
|
|
https://sg-mktg.com/MTY3MzY3NjU4NnxySEN0dDJPb1BlT1BEZzBlSjMxU1RWSmZJM2N3clV0QnhfTVRaMVdDOTFhbXkxRGpCQ1p0d2ZKeVoxOXRGYXU5MlJsaDM1SHJubzBWNkhzbWsxSXBUZ2MwU3FnS3BaUUtBVEhUN1loV2YwWHRNVmxjSF9walBkdVkyQ2pkNWF0cXY2c2t2RkZOSFJKdVZVN2x2Q3RWR1hmY3ZWem8tdFpKWWh5akRYck9zS0M3YUlXeF9IbG4tT3czWGVBUkpBTDFuV3NUMGsyNGwtVnlMMzJseHhJMGFkaEFMZEJwenhnbTRQQjRKaUxfYzQ1cHJjb08wdDF3eF84dFY2eHIybW1tWFE9PXxU_B21z5ijn_GpWdkgYbUxpF_J-jQezYrLHEb48V113w== Nutgraf is a paid weekly emailer that explains the key changes in business, technology and finance in India in the last seven days. In a way you will never forget. Know someone who loves Nutgraph? Want to get The Nutgraf every week? |
|
The Nutgraf is published by The Ken, a digital, subscription-based publication focused on technology, business, science and health. |