smartphone market in the world.
Globally, the number of mobile phone users is expected to reach 4.55 billion and mobile phone internet user base would be 2.23 billion by the end of 2014.13 Smartphone adoption will also continue its fast paced trajectory with the total smartphone user base expected to reach 1.75 billion by the end of 2014.13 The growth is being led primarily by the developing regions of Asia Pacific, notably India and China. The overall Indian mobile handset market grew at 21 per cent YoY.14 By the end of 2013, India is estimated to have gained a mobile phone user base of more than 900 million.15 While the worldwide smartphone shipments have surpassed 1 billion units in 2013,16 India became the third largest smartphone market in the world in terms of shipments of 44 million units.14 Smartphone shipments in India are expected to grow steadily over the next 5 years. While Samsung maintains the lead in the smartphone market in India, other major players are Nokia, Micromax and Karbonn. The Android smartphone market continues to be dominated by low cost smartphones.17 By the end of 2013, India had approximately 66 million internet enabled smartphones and the number is expected to reach 334 million by the year 2018.18 This growth presents a good market base for digital advertisers, mobile gaming developers, VoD and digital music companies.
The CAGR (2013–2017) for smartphone shipments in India as compared to the corresponding growth rate in developed countries such as USA, UK and Japan is much higher and at 53.8 per cent beats the growth rates in developing nations such as China and Brazil.19 This could have a spillover effect on the growth of mcommerce, mobile advertising and mobile gaming.
Source: AKAMAI – State of the Internet Reports Q3-2012 and Q3-2013, KPMG in India analysis
Broadband (>10 mbps) connectivity (percentage above 10 mbps)
Source: IDC shipment estimates 2013, KPMG in India analysis
Internet enabled smartphones in India, 2013(E) - 2018(P)
Source: IDC worldwide mobile phone tracker, 4 Mar 2013
CAGR - Smartphone shipments (2013-2017)
66 115
161 215
267 334
0 50 100 150 200 250 300 350 400
2013 (E) 2014 (P) 2015 (P) 2016 (P) 2017 (P) 2018 (P)
Million
11%
7.40% 7.60%
1.70%
23.10%
53.80%
0%
10%
20%
30%
40%
50%
60%
China USA UK Japan Brazil India
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reser
101
As the average selling prices for smartphones continue to decline, smartphone shipments are expected to surpass feature phone shipments by the year 2016.20 At present, feature phones continue to account for a sizable share of approximately 85 per cent of the total handset shipments in India.21 However, feature phones may have already started losing the market share to smartphones starting this year.
In 2014, more and more mobile phone users in India will likely switch over to smartphones and tablets as these devices become more affordable and as 3G/4G networks connectivity improves. Young urban population and cultural openness to mobile devices are other factors that are likely contributing to the growing adoption of smartphones in India.
Market share of smartphone OS in India, 2013 By share of online traffic, Android-based smartphones dominate the Indian market with 90 per cent traffic generating from Android-based smartphones, followed by 5 per cent traffic driven by Windows operating system.
Apple’s iOS stands third in line with only 4 per cent smartphone web traffic generated by iOS in the Indian market.22
Tablet sales show modest growth
Tablet adoption in India is growing thanks to the availability of these products at a wide range of prices- high-end Apple and Samsung devices that sell for upwards of INR30,000 (USD500) to entry-level devices from players such as Micromax, Karbonn and Lava that are available at prices below INR10,000 (USD165).23 In 2013, the total shipments of Tablet PCs in India were 4.5 million compared to 3.11 million shipments in 2012,24 a growth of 45 per cent in one year.
Key drivers for growth are increase in the number of new models launched by companies eyeing the Indian consumer market, as well as the demand expected to be generated via enterprise adoption of Tablets. The visibility of Tablets in the Indian market is additionally being pushed by an increasing demand for Tablet PCs in the education sector in India in order to provide affordable tablets to students at a low price.
Android OS based tablets dominate the Indian market followed by iOS and Windows based tablets. The tablets market may continue to grow and Android could remain the dominant OS, though it is expected to lose some share to Windows and iOS platforms as the latter launch more models at affordable prices for the budget conscious Indian.
Although penetration of Tablets in India is growing, there is still a lot of ground to be covered when compared to other countries in Asia. The Tablet penetration in India is 2 per cent and is not as impressive as the penetration seen in other developing countries such as China where it stands at 45 per cent.25 Further, the growth from 2012 has not been as impressive as has been experienced in other countries.
20. IDC press release, 26 Nov 2013 21. KPMG in India analysis 22. StatsCcounter 2013 data
23. KPMG in India analysis
24. CMR India Quarterly Tablet PC market review 2013, KPMG in India analysis 25. Nielsen Asia Mobile Report, 2013
Kids are early adopters of technology and to cater to the ‘Screenagers’, kids’ entertainers are ensuring that they are served their daily dose of entertainment at a time, place and screen convenient to them. To keep this wired generation engaged across screens, entertainers are customising content across platforms, be it - video games, VOD, streaming content on the mobile and tablets, etc.
- Nina Elavia Jaipuria Executive Vice President and Business Head
Kids Cluster, Viacom18 Media Pvt. Ltd
Ssmartphone OS Share of Web Traffic (%)
Android 90%
Windows Phone 5%
iOS 4%
BlackBerry 1%
Source: StatCounter
Smartphone OS market share split by traffic
Source: CMR India Quarterly Tablet PC market review 2013, KPMG in India analysis
Tablets shipments in India, 2012 – 2013(E) (in millions)
3.11
4.5
2012 2013(E)
The stage is set: FICCI-KPMG Indian Media and Entertainment Industry Report 2014
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
3G in India could be at an inflexion point The Indian market is still awaiting the technology leap which was promised when 3G services were launched in late 2010, and 2013 was expected to be ‘The Year’. Also, 3G adoption has been slow compared to the growth rates expected at its launch. 3G adoption requires supporting factors such as higher smartphone penetration, availability of relevant content and applications and improved network coverage by operators. So far, inadequate network coverage, lack of sufficient spectrum, high price of 3G services, and the absence of mass market affordable 3G handsets have prevented these services from becoming a success in the country.
While there are several roadblocks that have prevented 3G services from achieving the expected uptake in India, most of them are short-term hiccups rather than long-term challenges. Slowly, yet steadily, after 3 years of launch, 3G has finally started to pick up in India. Investments from telecom operators in improving the infrastructure, improved affordability of handsets, decline in 3G rates with the launch of 4G and aggressive marketing by telecom companies will likely act as drivers for growth of 3G services. India, currently, has about 42 million 3G connections which are expected to shoot to approximately 369 million by the end of 2018.26 Major telecom players in the country are considering focussing their energies and resources to expand their networks and to increase their 3G user base. In November 2013, Vodafone announced investments close to 700 million pounds (about INR71 billion) in India during the next 2-3 years to expand their 2G and 3G network.27
Apps have gone mainstream globally
Apps are to mobile what websites were to desktops and are key to defining the overall mobile ecosystem.
Apple’s App store and Google’s Play have been at the forefront of bringing off-deck content at the fingertips of the consumer, and these continue to be the largest active off-deck stores by virtue of their rich supporting ecosystem and growing developer communities. The total number of app downloads, globally, stood at 102 billion approximately in 2013, and is estimated to reach almost 269 billion by the end of 2017.28 The app economy is expected to continue to expand and growing markets such as India and China would likely provide the firepower for this growth.
Factors such as growing mobile Internet penetration, affordable smartphones, and mobile-ready regional content have mostly led to the growth of the app ecosystem. Mobile valued added services (MVAS) which is a paid content on-deck model controlled by telecom operators could be under serious threat.
26. KPMG in India analysis 27. Vodafone press release, 13 Nov 2013 28. Gartner press release, Sep 2013 Source: Nielsen Asia Mobile Report 2013
Tablet Penetration by Country, 2012 - 2013
Source: KPMG in India analysis
3G subscribers in India, 2013 to 2018(P)
1. Inadequate network coverage because of limited 3G towers
2. Limited spectrum availability
3. High price of 3G data services as compared to GPRS/
EDGE
4. Lack of affordable 3G enabled handsets
5. Patchy connectivity and inconsistent experience on 3G network
Source: KPMG in India analysis
Challenges
1. Investments by Telecom operators to expand and improve 3G infrastructure to tier2 cities and rural India
2. Affordable prices for 3G data services 3. India’s growing Internet population 4. Affordable smartphones and tablets
5. Growth of social media, gaming, VOD and the need for youth to stay connected by sharing pictures and videos
Source: KPMG in India analysis
Growth Drivers
Hong Kong China Singapore Thailand Indonesia India
42
Million © 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reser
103
Share of free app downloads globally, is also anticipated to increase, largely led by growth in countries such as India where users are still not open to pay for apps. Free apps currently account for about 60 per cent and 80 per cent of the total available apps in global Apple App Store and Google Play, respectively. Free app downloads at 93 billion constituted roughly 91 per cent of the total global downloads in 2013.29 It is estimated that free app downloads would account for 92 per cent with 128 billion downloads by the end of 2014.30
29. Gartner press release, Sep 2013 30. Gartner press release, Sep 2013
2012 2013E 2014P
Free
downloads 57 93 128
Paid-for
downloads 7 9 11
Total
downloads 64 102 139
Free
downloads (%) 90% 91% 92%
Source: Gartner Press release, Sep 2013
Mobile app store downloads, worldwide, 2012-2017 (in billions)
The recent WhatsApp acquisition by Facebook is a thumping validation of today’s mobile frenzy among consumers and investors alike. With its inherent capabilities to bridge physical transactions and drive content and services to consumers, it is safe to say that the world has been engulfed by mobile domination.
Interestingly, there are rafts of statistics to show how India is galloping into the thick of the mobile action. Multiple reports state that in 2013 alone, between 247-257 million handsets were sold in India in 2013, registering a year-on-year growth of 181%. Another report estimates that from the 169 million active Internet users in India, nearly 130 million use their mobiles to get onto the Internet, out of which 49 million are active users in rural India. On the other hand, India’s app developer base is estimated at 250,000 and expected app downloads are slated to cross 8.4 billion by 2016.
For users, mobile apps are enabling a rich ‘first Internet experience’
with immersive engaging experiences despite India’s undulating internet bandwidth footprint. For developers, mobile represents the power to productise innovation and lower the barriers to entrepreneurship; which is a perfect fit for creative, tech-savvy, but resource-constrained Indians. Today, India’s young App Entrepreneurs have an unprecedented opportunity to create products through apps that will touch the lives of millions of mobile users across the world. Global ambitions now also define a growing swathe of budding student developers and start-ups from India’s non-metro towns who are carving a niche in the global mobile app scene.
To make a lucrative venture and build scale, mobile developers are resorting to a mix of advertising-enabled free apps strategy along with in-app purchasing to trigger app downloads. On the other hand, brands have started seeing the shift in consumption habits from desktop to mobile and are increasingly opening their purse strings towards mobile advertising. This industry is also being catalysed by the next billion users of the country, who will demand apps in regional languages that will blur the language divide in content consumption. In a nutshell, ‘mobile’ is sculpting a high growth ecosystem in India with beneficiaries in the form of rural and urban consumers, telecom operators, developers and advertisers.
With mobile becoming the primary screen for Indians, the app ecosystem too will continue to evolve fuelling India’s mobile growth trajectory. On the other hand, with precedents of mobile businesses like WhatsApp fetching heady valuations, it won’t come as a surprise if 2014 is dubbed as the year of Indian mobile developers contributing to the global ‘app-onomy’.
Unless otherwise noted, all information included in this column/ article was provided by Dippak Khurana. The views and opinions expressed herein are those of the authors and do not necessarily represent the views and opinions of KPMG in India.