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Internet Use Growth Expected To Underpin Indian Smartphone Adoption

April 27, 2015 - Written By David Steele

A report from the Boston Consulting Group released today explains that they expect smartphone penetration to double in India over the next three years on the grounds of strong growth in Internet usage, but also that smartphones are still “too expensive for many” in the country. In India, in common with many Internet-developing countries, the most common way to access the Internet is using an inexpensive and mobile device. The BCG’s study highlights three factors that will drive the adoption of smartphones in India, these being improved awareness, more affordable access and an expanding reach. It’s the middle point that is perhaps most interesting, that of making Internet access more affordable. The study explained that the availability of low cost, Internet-capable devices is key to growing Internet penetration amongst the lower income population. The report notes that, “nearly two-thirds of mobile phones sold in India today are Internet ready, but the least expensive models still cost $60 or more (about Rs. 3,850). This is too expensive for many. Prices need to come down.”

Things are changing, however. Indian smartphone manufacturers such as Lava and Intex are selling devices in the Rs. 2,900 to 4,500 point and this is a high growth area. The potential for massive growth in the Indian market has also excited other smartphone manufacturers such as Xiaomi, masters of low cost smartphones, as well as Google’s Android One smartphones designed for developing markets, pictured above. A recent deal between the former chairman of Indian industrial conglomerate, Tata, and Xiaomi should underpin the smartphone businesses’ push into India.

The Boston Consulting Group’s estimates put Internet use growth as being split between the urban and rural populations. The number of urban Internet users is expected to be at more than double from 130 million last year to at least 300 million by 2018. However, the rural expansion could see a current userbase of just 60 million increasing to 280 million by 2018. BCG notes that Internet access is expected to continue to expand in line with disposable income, but also concedes that smartphone data plans are costing less year on year as local carriers cut costs. There are a number of inexpensive, bite-sized data plans being incorporated with added benefits such as bill payment integration for the Google Play Store purchases. As more and more families are able to afford Internet access and as Internet costs are reduced, this should underpin the strong growth in smartphone adoption.

One area that needs ongoing development is the deployment of mobile networks: the current universal 2G network coverage for India’s cities needs to be replicated in the countryside, and urban networks need to be upgraded through 3G to 4G LTE technologies. Currently, one in ten consumers in India own a smartphone and LTE networks have only very recently been launched. Given the scope for massive growth, it is no wonder that the region is considered to be very important by smartphone manufacturers.