The report recommends key measures in overcoming the various challenges faced by the mobile handset sector and outlines a roadmap for future growth. It comprises inputs concerning the mobile handset sector during the drafting of the National Telecom Policy 2011.
Today, India is the world’s second-largest wireless telecom market after China, with the total wireless subscriber base crossing 865 million at the end of August 2011. The mobile handset is no longer a luxury product. It is expected to play a pivotal role in accelerating growth in different segments of the economy over the next decade.
Where the sector stands now
Although teledensity in urban India reached 164.87% by the end of August 2011, it has to go a long way to bridge the digital divide in the rural areas. The rise in teledensity is backed by robust growth in the handset volumes, which stood at 150 million in 2010. India accounted for more than 10% of the global handset shipments for the same period.
What is the outlook for the sector?
By 2020, the demand for handsets is projected to reach 350 million a year, with 505 million handsets estimated to be manufactured in the country during the same year. The market value of the handset industry is expected to go up to INR 1,032.5 billion from the present size of INR 345 billion in the coming decade.
One of the primary drivers for the sector has been an increase in the average household communication expenditure, which is expected to significantly double from the 2005 level of INR17 trillion to INR34 trillion in 2015.
The untapped rural market is expected to provide handset players the next phase of growth.
The rural market demands the low end feature-rich phones, being mostly catered to by the home-grown handset vendors. The number of 3G subscribers expected to cross 300 million by 2020, fueling the growth of 3G-enabled handsets. As a result of the mushrooming demand for handsets, the share of the replacement market will get augmented which will in turn push up the average selling price of handsets in the country to INR2,950 by 2020 as compared to INR2,300 in 2010.
India set to become key handset manufacturer
The prevalent hypercompetitive market, with 15 players, is waiting to undergo a phase of consolidation, so as to infuse sustainable growth within the industry.
The draft of the National Telecom Policy 2011, clearly states that the intent is to help India emerge as the key manufacturer of handset equipment over the next decade. Indicative efforts have been outlined to help achieve this target. Achieving this target will also help India to emerge as a key exporter for handsets and handset equipments across the globe, from a key importer today.
Export volumes in 2010 stood at 80 million handsets and were valued at INR153 billion (US$3.3 billion). Imports on the other hand included 90 million handsets valued at INR 258 billion. This market is expected to register a CAGR of 14% to achieve export volumes of 300 million units valued at INR690 billion by 2020. On the other hand, the level of imports in the same year will plummet to 145 million handset units valued at INR 612 billion.
Key challenges faced by the handset segment in India include:
- Urban and rural digital divide
- Creation of vernacular and localized content for handsets
- Creation of a manufacturing ecosystem
- Environmental sustainability and health hazards faced by handset users,
- Security issues associated with handsets
- Irrational taxation regime in the country
Recommendations to overcome these challenges:
- Developing an eco-system for manufacturing, R&D, export and FDI
- Creating rational taxation regime with respect to handsets
- Protecting customer interests
- Creating a service enabling environment
- Ensuring security
- Environmental sustainability
Several players from the Indian market have begun to make their impact on the global map through strategic alliances. Globalization will eventually be, the name of the game for operators in India, once the phase of consolidation is initiated. The belief is that telecommunications will help every Indian to go global at the touch of a button.
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