Decoding The World’s Most Lucrative Mobile Market

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What makes India the most lucrative mobile phone market in the world? We go beyond numbers and decode the market mantras.

When the 2011 census was published – a curious statistic popped up – more households had mobile phones than toilets. There is little wonder that in 2016, when Reliance Jio, India’s upstart telecommunications company offered 4G services for free, they managed to bag over 100 million subscribers in just six months. In perspective, that’s roughly twenty million more than the population of Germany.

This is a new pattern that has evolved with technology – one that started at the beginning of this decade and continued. By 2014, more new subscribers signed up in India than did in China or all of Africa.

This is not just limited to mobile data services. Hardware and mobile phone manufacturers as well as ‘data mining’ service providers are reaping huge gains. According to an IDC report, India is the fastest growing smartphone market in the world, accounting for over 27.5 million devices sold in the second quarter of 2016, with the market growing by over 10% a quarter.

It sounds completely plausible – given that over 200 million mobile phones were sold in India in just two years – 109.1 million phones in 2016 versus 103.9 in the preceding year – 2015. But, by no means is it indicative of a market nearing saturation. Making the next billion-and-a-half phones expected to be sold in India within the next five years is an $80 billion opportunity for the manufacturing and components industry.

There are few places in the world that make for such a lucrative market. Chinese, Korean, Japanese, European, American and some home-grown companies are trying to wrest control of this market as quickly as possible. Many, even relatively unknown ones, have entered the market and succeeded at a lightning speed. iTel, a Chinese newcomer entered the Indian market in the beginning of 2016 – but was the number two player by the end of the year.

But what makes India such a lucrative mobile phone market?

The answer is the incredible amount of room to grow. In the beginning of 2016, India had only 125 million smartphone users. By January 2017, that number had crossed 300 million. The mobile phone accessories market alone was worth $1.2 billion in 2015, expected to triple by the end of the decade.

The answer also lies in the varied ways that new digital natives use technology.

Changing social dynamics

Why have mobile phones proved so popular in India? The answer is apparent if you lived on the subcontinent in the last few decades – it was a void that needed filling. Earlier, the government held a monopoly of providing landline connections – with months, even years of waiting for a single line. It’s this lethargy in service delivery that led to India having only 31 million phone connections in 2001, despite a population that had already crossed one billion.

It took only six years for the revolution – by 2006, India has 156 million mobile connections. People were buying cell phones, connecting to each other in a way that simply wasn’t possible before. And soon enough, they started using apps. 

In 2011-2012, a bulk-SMSing app called GupShup had almost as many users in rural India than Facebook did across the country. It allowed registered users to create ‘lists’ – basically, groups they could forward short messages on news, jokes, culture and the like with, appended to a small advertisement at the end. The market was so lucrative that it had three million advert-creators for 37 million consumers.

Gupshup’s spam team once attempted to shut down some lists that were transmitting seemingly-gibberish messages – only to find that it was a tribal language called Hmar, spoken by only 65,000 people in parts of the North-East. The mainstream media had nothing on offer for the Hmar people, so they made their own channel of communication to spread news – and exist in the digital world.

The example shows that for app-developers, India is a vast pool of untapped potential – with market penetration appearing in oft-unexpected places.

For a highly stratified society, mobiles connected people who had never been connected before. Shashi Tharoor’s famous example of the coconut vendor who takes orders on his cell phone while perched atop a tree. What’s also interesting about phones are the new spaces they place users in. Mobile phone showrooms are the new salesmen of social status, a place where people are ‘socialized into the rituals of global consumerism.’

Challenges

The backdrop of India’s cell phone revolution is a highly price-competitive telecom industry that features the lowest call tariffs in the world, even for relatively high-end services like 4G. Mobile phone manufacturers adopted a similar model, frequently coming out with low-cost phones that have high-end features.

The challenge is that Indian companies are not surviving this competition. The most successful brands in the market are Chinese – who together made up more than 46 percent of the Indian market by the end of 2016. It was the first time when not even a single Indian vendor had made the top five. Though two out of three phones sold were ‘made in India’ in 2016, less than six percent of their components by value were manufactured locally, according to an IIM-B report.

The privacy and security concerns raised by Chinese handsets are compounded in a country that lacks a formal law on data privacy. In 2014, the Indian Air Force issued an advisory to its officers against using Chinese Xiaomi handsets, after security contractors found that a single company made software that runs on over 700 million devices across the world – and transmitted user data back to servers in China. The Air Force denied enforcing any ban – but two years later, its officers were issued ‘hack-proof smartphones’ without app capabilities as a security measure.

Collecting user data is an emerging market, valued at $24 billion in 2015. And while Chinese phones may compromise privacy, they’re not the only ones. Indian companies also bundle adware with their phones, sometimes even remotely installing them without user consent.

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Sometimes, if it’s too good to be true then it probably isn’t it. The Noida-based company Ringing Bills made headlines in 2016 when they announced the sale of the world’s cheapest smartphone – at Rs. 251 a piece. The idea was that the phones would come loaded with preinstalled applications – whose developers would pay Freedom Bells in exchange for giving them access to a mass subscriber base. But in Ringing Bell’s case, the reality was closer to a Ponzi scheme than a new business model. Their founder was arrested for fraud in January, after less than ten percent of Ring Bell’s 70 million orders were fulfilled.

The market is expected to keep growing – irrespective or piracy or fraud. Ultimately, the takeaway from the last decade is that companies who understand what Indian consumers want can go from 0 to 100 (million) in a matter of months. It’s a multi-billion-dollar pie up for grabs in the world’s fastest growing mobile phone market. But going by current trends, Chinese companies will be eating most of the pie.

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