With his salt and pepper hair and soft-spoken manner, Suneel Bandhu could easily be mistaken for a college professor. However, the ex-COO of Indian wireless carrier Tata TeleServices, presenting at Axis Tel Aviv this week, has a decidely commercial objective- finding Israeli startups for investment. As a member of Mumbai Angels, Suneel is looking to repeat the success of their very first investment, InMobi, now valued at more than $1 billion. Although relatively few Israeli startups are focused on India, the market dynamics driving its mobile sector are worth a closer look.
From a modest $200 million in bi-lateral trade in 1992 (when diplomatic relations were established), India-Israeli trade surpassed $6 billion in 2012-13. This number is projected to double with the passage of a Free Trade Agreement. Despite the momentum with India, Israel-China (including Hong Kong) trade is on-track to hit $10 billion this year, representing 13% of total Israeli exports (Bank of Israel). India offers some unique characteristics for mobile technology vendors.
Indian Market at a Glance:
- 150 million mobile Internet connections
- 250 million Internet users
- 25-30 million 3G customers
- Mobile Data usage on the Network growing 14-15 % QoQ
- Mobile Data ARPU is 60-70 Rupees per data user
- Mobile Data usage is approximately 200 MB per data customer
- Mobile Data realization per MB is Re. 0.30
- Mobile Data as a percentage of total revenue is about 7.5%
Youthful Demographic: India’s high birth rate, in contrast to China’s one child policy, means a younger demographic. More than half (51%) of the population is under 25. Two thirds (66%) are under 35. By 2020, the average age of an Indian will be 29 years, versus 37 in China.
Bollywood films and actors, such as Deepika Padukone, are driving the adoption of mobile Value-Added Services
Smartphone Adoption:
India is the world #2 wireless market, with 900 million wireless users. Only 70 million currently have Smartphone devices, but that number will soar to 250 million by next March. Nearly all of these (92%) are Android devices. Samsung is the market leader, with 26% market share. However, entry-level handsets from local manufacturers like Micromax, Karbonn and Lava are the fastest growing segment, accounting for 40% of the market. Expect to see more of these brands in the West. Other foreign OEMs each have market shares in the 4-5% range, including Sony, Nokia, LG and HTC.
Apple has a very limited market presence in India, due to high price and limited distribution. India was a major market for Blackberry (like Indonesia), but the youth segment abandoned RIM for Android. Feature phones such as Nokia Asha still sell very well in the rural and semi-urban markets, largely because of the brand’s historical leadership, after-sales service and durability.
Rapid Transition to Data Services:
India’s mobile services market in India is more than US $30 billion per year, placing it in the Top 10 globally. Data services currently contribute only about 8-9% of revenue for mobile operators, versus 52% in the US. This will grow rapidly with the population of first time internet users, accessing Internet via mobile data networks.
Both GSM and CDMA mobile systems exist, though CDMA is declining due to limited selection of devices. 3G services are available across major cities and towns. 4G services are currrently available in four cities through Airtel. A new service provider, Reliance Jio, is seeking to disrupt the mobile data services business, through a soon-to-be-launched nationwide 4G service supported by a mix of content, applications and services.
Fierce Competition Among Wireless Carriers:
While the mobile sector in most mature economies is highly concentrated (2-4 players), India is very fragmented. Airtel is the largest player, with a revenue market share of 31%. The next largest carriers are Vodafone, Idea, Reliance, Tata Teleservices, Aircel, MTNL and BSNL (both majority government owned), Uninor, MTS, Videocon and Loop Mobile. This competitive environment helps depress consumer fees, with a mobile data Average Revenue Per User (ARPU) of only 60-70 Rupees per month (USD .98- 1.15).
The ICC World 20 Cricket Championships this week is expected to drive millions of new mobile data subscribers
Content Dominated by Bollywood, Sports and RingBacks:
Film (Bollywood, with songs interspersed) and sports (cricket, international soccer) are the most popular entertainment for Indian consumers. On mobile, this week''s ICC World 20 Cricket Championships, is excpected to spur the adoption of mobile value-added services. E-commerce and m-commerce is a fledgling business that is likely to grow rapidly, with the Cash on Delivery model integrated as an alternate payment mechanism.
Caller Ring back tone (CRBT) is the largest revenue generating value-added service. Users typically pay US 50 cents monthly for the service and 20-30 cents per month per song in their ring back tone library. The penetration of CRBT is almost 8-10 % of the subscriber base among different mobile service providers. CRBT payments are made through the phone bill.
In addition to e-mail, Facebook, Twitter and Youtube are popular applications used by Smartphone owners. Messaging has been a dominant application for data services, with a prevalent culture of chat as well as forwarding of jokes/memes among Groups of users. Among the young – Tumblr, Pinterest, Reddit, Vine and Snapchat are rapidly gaining popularity as they spend less time on Facebook.
Some Israeli companies, such as Comverse, Gilat and Kaltura, have built profitable Indian businesses. In my upcoming one hour Keynote at the India Gadget Expo, June 19-22 in Hyderabad, I will include several Israeli technology vendors within the presentation. Contact me if you would like to be one of them.