Mobile Internet in India

August 2011

Contents Executive Summary ..................................................................................................... 3 Overview of Telecom and Mobile Sector in India .............................................. 7 Mobile Internet in India ........................................................................................... 11 Applications Accessed Using Mobile Internet .................................................. 12 Typical Handset Price and Monthly Spends ...................................................... 15 Disintegrating Access Behaviour .......................................................................... 16 Future of Mobile Internet in India ........................................................................ 18 Methodology ................................................................................................................ 22

Mobile Internet in India - 2011

Executive Summary
Mobile Internet in India has existed since the prevalence of 2G services in India. However, the number of users has at best been fairly limited to few million, and by far to a select set of people. As per TRAIs report for the quarter ending December 2010, India has about 812 Mn Mobile Subscribers as on March 2011. As per IMRB Internationals latest estimates, the number of Claimed Mobile Internet users1 has risen to nearly 35 Mn, and the number of Active Mobile Internet users2 has also increased to 26.3 Mn by March 2011.

Claimed Mobile Internet Users are the mobile users who have accessed Internet using their mobile phone at least once in the past 2 Active Mobile Internet Users are the mobile users who access Internet using their mobile phone once in last month

Mobile Internet in India - 2011

The adoption of Mobile for accessing Internet is expected to grow in the immediate future. It is expected that by September 2011, there will be 46 Mn Mobile users who would have accessed Internet using their mobile phones (with 15% growth quarter-onquarter). Of these, 35 Mn will be active Mobile Internet users (i.e. accessing Internet using their mobile phone at least once a month).

Lower subscription rentals, availability of feature-rich cell phones at cheaper prices, increased PC and digital Literacy, greater awareness of the Internet medium are some of the reasons why mobile Internet penetration has risen in India. Awareness of the Internet through existing media like Television, Radio is also an important ingredient towards greater Internet awareness and adoption.

70% of the claimed mobile Internet users (urban India) belong to the Top 2 SECs i.e. SEC A and SEC B. Along similar lines, about 55% of the claimed mobile Internet users are from the Top 8 Metros (Mumbai, Delhi+NCR, Kolkata, Chennai, Bangalore, Hyderabad, Pune and Ahmedabad). Additionally, about 63% of the active mobile Internet users

are from the Top 8 metros.

Mobile Internet in India - 2011

Among the applications accessed using mobile Internet - E-mail, Chat, Search, Social Networking Sites & Portal are the most commonly used ones. Interestingly, Chat is a commonly used application by individuals aged 35 years and above.

Similar to inherent mobile penetration, prepaid connections continue to be the dominant connection type even in case of active mobile Internet users. About 90% of the active mobile Internet respondents have a prepaid mobile connection. Other interesting findings emerging from the data report that the average handset cost for an Internet phone is Rs. ~6,700, while the average mobile phone bill for an active mobile Internet user is Rs. 389.

The future of Indian mobile Internet usage is promising with the introduction of the 3G spectrum and increasing usage of mobile applications or mobile apps as they are popularly referred to as. The 3G spectrum will offer end users better options for Internet access and opportunities for video calling, video on demand, multi-tasking among numerous other applications. Mobile applications will be at the heart of the mobile Internet growth. End users are appreciating the capabilities offered by various apps and are increasingly relying on these for completing their daily work or even for leisure purposes. Mobile applications custom built for the urban and rural consumers will be observed with rising affluence levels and demand on both fronts.

Apart from 3G services and mobile applications, the introduction of exciting gadgets like smartphones will also play a role in increased mobile Internet usage. Data plans suited to the end users, which can be used in conjunction with such devices are increasingly being sold by various telecom operators. Introduction of tablets is another recent phenomenon that could provide users to better their experience in accessing improved services when being on the go. Apart from the

Mobile Internet in India - 2011

In sum, Internet growth in India promises to increase greatly with the increasing influence of mobile apps, introduction of 3G services, availability of better mobile phones and a rising mobile subscriber base. Mobile phones have the potential to become a primary Internet access point, in the foreseeable future. However, it is to be seen whether this would take away the usage of PC in accessing Internet or both could co-exist.

Mobile Internet in India - 2011

Overview of Telecom and Mobile Sector in India

The Indian mobile subscriber base has risen exponentially since the start of the 21st century. With a large number of mobile telecom operators, there has been increased competition and necessity to provide services at lower rates. Telecom operators have had to compete heavily on pricing and services offered. As a result, mobile subscription
Cost-Effective Phones Increased Internet Awareness

Drivers for Mobile Internet Lower Rentals

rentals have decreased, enabling a large base of people for using the mobile services. As per latest Telecom Regulatory Association of India (TRAI) reports published in April

2011, the number of mobile telephone subscribers in India has reached 812 Million by March 2011. This represents a year-on-year (YoY) growth of 53% compared to January 2010 when there were 526 Million mobile subscribers.

Passive infrastructure sharing by telecom operators has reduced costs for each operator, and is another reason for lower subscription rentals. Network cost

optimization, outsourcing of non-core activities have been other areas that have also helped telecom operators save costs and levy lower charges to consumers.

In addition, the availability of cost-effective mobile phones has been another reason for a rising mobile subscriber base in India. As per latest industry reports, there are more than 50 mobile handset manufacturers in India today, and ever increasing in the Rs. 25,591 crore Indian handset market (Source: Frost and Sullivan). As a result, there is tremendous competition among these entities. Also, with a consistent demand for cell phones observed across villages, towns, cities and states, mobile handset companies are competing with one another to provide feature-rich phones at reasonable prices. The common man has been a clear winner with a wide range of mobile phones to choose from.

Mobile Internet in India - 2011

Besides an increasing mobile subscriber base and cheaper cell phones, the rise in computer literacy and Internet awareness has played an important role in increased Internet usage. As per I-Cube findings, the number of Claimed Internet users3 in India has now reached 81.8 Million, and the number of Active Internet users4 has touched 64.7 Million.

Internet awareness has increased greatly and the reasons are multi-fold. People are increasingly more curious to access email, chat, news, social networking and information search sites on the Internet. Social networking sites like Facebook, Orkut, Twitter and IBIBO have attracted active involvement from people belonging to various age and gender groups. People are able to share news, photos, points of view etc. from the convenience of their homes/offices using the Internet.

With this increasing inquisitiveness, people have been trying to access the Internet through various access points. The majority of such Internet access happens either at home, work or cyber cafes. However, with rising mobile penetration and availability of cost-effective mobile Internet plans, the mobile medium has the potential to expedite overall Internet growth greatly. Mobile devices also offer a distinct feature of accessing Internet being on the go.

Applications that facilitate communication such as micro-blogging sites could increase mobile Internet usage. People often tweet news stories, pictures, or even personal experiences via their mobile phones whenever they want to. Moreover, a host of cricketers, film celebrities, well known businessman, and other celebrities have joined
3

Claimed Internet users are the users who have accessed Internet using their PC or laptop or netbook or mobile phone at least once in the past 4 Active Internet users are the users who have accessed Internet using their PC or laptop or netbook or mobile phone at least once in the last month

Mobile Internet in India - 2011

Twitter. As a result, Twitter has emerged as a popular mobile application in many mobile phones today. In fact, quite a few phones have apps like Twitter, Facebook, Email, Chat in-built, and the phones are marketed with this USP.

Thus considering various aspects, in turn, the number of Claimed Mobile Internet users have also increased and reached 37.2 Million by March 2011. These findings provided by IMRB Internationals ICube study additionally report the number of Active mobile Internet users to have reached 26.3 Million. Earlier IMRB Internationals estimates had reported the mobile Internet subscriber base to have been 2 Million in 2009. As per TRAIs report for the quarter ending December 2010, India has about 752 Mn Mobile Subscribers as on 31st December 2010. About 332 Mn (44%) of these Subscribers own Handsets that are capable of accessing Internet.

Increasingly today, various mobile applications are driving peoples mobile Internet usage. Also, E-ticketing for movies, rail travel, air travel etc are some other popular applications of mobile Internet. In fact, sites like BookMyShow have reached over 100 9
Mobile Internet in India - 2011

major Indian cities and towns, and are now providing home delivery of tickets to a vast number of people.

As far as latest telecom technologies, i.e. in terms of Internet Speeds and Bandwidth are concerned, India lags behind various countries. While quite a few countries today have transitioned to 4G technologies, people in India even today are using 2G technologies for Internet access. However, 3G services were launched towards the end of 2010, and are increasingly gaining popularity among users with the bandwidth, speeds, services and advantages that they offer.

Wireless Internet
As of March 2011, there were 36.03 Mn wireless connections through which users get connected to the Internet. Around 1.03 Mn users connect to Internet using dongles or wireless cards. A little more than 35 Mn users have accessed Internet using their mobile phones. The research insights of this paper reflect on the usage characteristics of the 35 Mn users who use Mobile phones to connect to the Internet. It does not reflect on usage of dongle owners.

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Mobile Internet in India

As per latest IMRB estimates, out of the 35 Million Claimed Mobile Internet users, 26.3 Million (i.e. 75%) are Active Mobile Internet Users. The Top 8 Metros and Small Metros collectively contribute about 76% (approx. 17.5 Million) of the Total Active Mobile Internet User base.

Claimed Mobile Internet 35 Mn Active Mobile Internet 26.3 Mn

Figure 1: Characteristics of All-India Estimates of Mobile Internet usage. Base: 37.2 Mn Claimed Mobile Internet Users & 26.3 Mn Active Mobile Internet Users (Urban India).

A deeper look at the distribution of Users among the 4 SECs clearly indicates that the Active to Claimed Mobile Internet Users proportion is high among SEC A & SEC B whereas this decreases among SEC C/D/E due to lower household incomes as well as lack of awareness and understanding of the medium. About 26 Million Claimed Mobile Internet Users belong to SEC A & B itself. Higher education, greater awareness and higher disposable incomes are observed among higher SECs, helping explain this trend.

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Mobile Internet in India - 2011

Applications Accessed Using Mobile Internet

E-mail, Search, Chat, Social Networking Sites, Portal, Online Games and Mobile Apps are some of the typical applications accessed by Active Mobile Internet users in the Top 8 metros.

Figure 2: Applications accessed by Active Mobile Internet Users in Top 8 Metros and their frequency. Base: 16.4 Mn Active Mobile Internet Users in the Top 8 Metros.

Email, Chat, Search, Social Networking Sites & Portal are the typically used applications

Online News is the most frequently accessed application on the mobile (All 7 days), followed by applications such as E-mail, Chat/IM, Search, Social Networking Sites, Portal, Mobile Apps and Online Videos which are accessed about 2-3 times a week.

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Mobile Internet in India - 2011

Currently, 5.4 Million Active Mobile Internet Users (33%) in the Top 8 Metros have accessed Mobile Apps and this number is on an upward swing due to the wide range of Mobile Apps available. The number of new mobile apps that are created daily is quite laudable, and bodes well for the telecom and mobile Internet industry as a whole.

Although Online Videos have been available on mobile much earlier than Mobile Apps, the usage is on the lower side; lower bandwidth and speeds probably account for low usage among active mobile Internet users.

Also, though E-banking is a convenient utility service for users, it is only used by about 1.96 Million (12%) people in the Top 8 metros. Factors such as security concerns and fear of misuse of private information could be attributed to this relatively lower figure.

In terms of applications accessed the most, Email and Search are typically the most used ones across various age groups.

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Mobile Internet in India - 2011

Figure 3: Applications accessed by Active Mobile Internet Users in the Top 8 Metros among various age groups. Base: 16.4 Mn Active Mobile Internet Users in the Top 8 Metros.

Interestingly, a sizeable number of active mobile Internet users in the age group 35-44 years use Chat as an application. It is quite possible that these could be Blackberry or other Smartphone users who use the mobile medium to discuss business / personal matters. Also, a significant majority of people above the age of 45 years typically use only Email, Search and Chat as far as their Mobile Internet usage is concerned.

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Mobile Internet in India - 2011

Typical Handset Price and Monthly Spends

Average Handset Cost Rs 6700 Average monthly mobile bill Rs. 389

About 71% of the total active mobile Internet users own handsets that are priced in the range of Rs. 3,500 to Rs. 10,000. Average cost of the handset possessed by the Active Mobile Internet user base is ~Rs. 6,700. This shows that people using Internet on their mobile phones generally own better & costlier handsets that enrich their mobile Internet experience. Even among Active Mobile Internet users, the share of prepaid users is very high.

Figure 4: Handset cost and average monthly bill among Active Mobile Internet Users in Top 8 Metros. Base: 16.4 Mn Active Mobile Internet Users in Top 8 Metros.

On an average, Active Mobile Internet Users spend ~Rs. 389 per month as far as their mobile bill is concerned. Even though this number is low, it is likely to increase as long as companies can fully utilize the potential of Mobile Apps.

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Mobile Internet in India - 2011

Disintegrating Access Behaviour

The potential for mobile phones to become a primary access point is another interesting insight worth noting. As per latest I-Cube findings, of the 28.53 Mn Active Internet users interviewed in 30 cities, there are 9% of users who access Internet mainly on their mobile phones.

Figure 5: Main Access Points among Active Internet users in 30 cities surveyed Base: 28.53 Mn Active Internet Users in 30 cities surveyed

Among these 28.53 Million active Internet users, there are 6.52 Mn active mobile Internet users. Of these 6.52 Million active mobile Internet users, about 91% or 5.96 Million were active Internet users by way of personal computers or laptops as well. The other 9% are active Internet users by way of cell phones only. A sizeable number i.e. 9% (approximately 0.56 Million) of all active mobile Internet users have cell phones as their sole Internet access point. interesting finding. The following illustration further elaborates this

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Mobile Internet in India - 2011

Figure 6: Usage of only Mobile for Internet by Active Mobile Internet users in 30 cities surveyed Base: 6.52 Mn Active Mobile Internet Users in 30 cities surveyed

Given that accessing Internet on mobile phone is quite a recent phenomenon in India, there are a small but encouraging number of users who use Internet on their mobile phone and not their PCs. While its a far cry to assume that such users would not take up the traditional devices; it is still important to consider that increasingly Internet will be introduced through mobile phones for a proportion of users (specifically among younger age groups). It is pretty apparent that disparate types of content will be accessed on different devices due to their inherent varied deliveries mobile for on the move access and PC/Laptop/Netbook for much more engaging content. However, with continuously improved mobile devices it will be interesting to witness this changing trend.

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Mobile Internet in India - 2011

Future of Mobile Internet in India

The introduction of 3G spectrum in India augurs well for improved mobile Internet penetration. Significantly better speeds are synonymous as far as a 3G connection is concerned. Also, multi-tasking in terms of simultaneous usage of voice and data applications is a key and very important feature provided by 3G services.

Future of Internet
-

Mobile

With a large number of people in India (especially in the metros), spending sizeable amount of their time travelling, 3G Internet services promises a host of things that one can do on-the-go, and even otherwise. Uninterrupted video on demand is a popular feature for those individuals that might want to watch videos on-the-go. Video calling would also be possible with the help of a 3G mobile Internet connection. In other words, one can talk to their family and friends without needing a computer with video chat feature, as well as an Internet connection.

Mobile Applications 3G Services Information Real Time Smartphones Tablets Flexible Internet Plans

Mobile Apps above all, will play a key role in paving the way forward for the mobile phone ecosystem. With over a billion mobile app downloads till date, and rising fast, the potential for mobile apps is mind boggling. Mobile app developers the world over are developing apps catered to every possible need. These apps are not only effective but also are fairly cheap, considering the functionality and usefulness they provide.

Apple Inc leads the mobile apps bandwagon with numerous apps provided through iTunes and its App Store. Google too, with its open source Android platform has recently made sizeable inroads in the mobile apps segment. Moreover, large mobile phone manufacturers like Samsung, LG etc. have decided to use the Android platform along with their devices. It is therefore conceivable that Android will catch up with Apple in terms of number of applications downloaded in the near future. Research in

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Mobile Internet in India - 2011

Motion (RIM) and Nokia with their BlackBerry OS and Symbian operating systems respectively, lag behind comparatively but also provide various apps to their customers.

Mobile applications suited to the Indian consumer i.e. both urban and rural, will be commonplace in the near future. An app for an urban consumer could range from providing an effective route to avoid traffic or even as complex as finding a store with the best deal for a particular product. A rural consumer on the other hand, could need an application that provides something as basic as daily weather updates in his/her local language or even something as complex as understanding how much he/she should produce so that he/she could generate the best revenue! Of course, the possibilities of such applications are endless. Mobile apps will play a critical role in contributing towards greater mobile Internet adoption and growth.

Also, people increasingly today need to know more information real time. For example, if an individual needs to know something before an important engagement, he/she could find the relevant information immediately, with the help of a mobile Internet connection.

Along similar lines, if an individual is already out shopping and suddenly remembers that he/she needs to shop for something else, but needs additional information to make a decision, then a mobile Internet connection could be handy. The desired information could be found, and very conveniently at that.

In fact, in the United States, the shopping experience has matured to such an extent in which a customer can key in the product he/she is looking for in a mobile app. The mobile app provides the best deal to the customer within a radius set by the customer himself/herself! Following illustration describes this concept briefly:

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Mobile Internet in India - 2011

Customer Out Shopping

Product Information Needed at a Best Price

Result Open 'Best Deal Mobile App' Enter Radius within which to find deal Hit 'Search' in the Mobile App Best deal provided by the mobile app

Figure 7: An illustration of a Mobile App introduced in the US

Besides 3G services and mobile applications, the increasing availability of gadgets like tablets in India, will also play a role in greater mobile Internet usage. Apple has taken the lead with its popular offering entitled iPad. Samsung has also made inroads in the tablet space with offerings such as the Galaxy Tab. Research in Motion (RIM) with Playbook, as well as Acer, Dell, Motorola and other players have developed tablets recently. Most of the tablets are equipped to accommodate a SIM card for Internet access as well as voice calls. Thus, with an ever increasing popularity of such gadgets, it bodes well for mobile telecom operators providing data and voice services to consumers, and for overall mobile Internet adoption as well.

Likewise, a slew of smartphones are available in the Indian market today. The inherent ability of an end user to install applications suited to his/her need is the primary reason why devices as tablets and smartphones are so successful globally. Although the smartphone and tablet categories are still relatively premium segments in the Indian market, affordable smartphones in particular are increasingly available. Reasonably priced and even branded smartphones are now available for a decent amount of approximately Rs 10,000 (or ~$250 USD). In other words, the smartphone market is not limited to an affluent set of end users and is increasingly covering a greater number of people in India today.

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Mobile Internet in India - 2011

In addition, telecom operators are providing mobile plans exclusively for the Internet. These plans are often termed Pay As You Go plans, where by a customer is able to use Internet services for a limited download limit and within a set time frame. These plans seem to be gaining popularity as it potentially allows an end user Internet access as and when necessary, without the end user needing to worry about download charges or other inhibitions that he/she may have.

Thus, with a number of factors that are directly as well as indirectly helping mobile Internet adoption, IMRB International estimates that by March 2012, there will be about 48 Million Active Mobile Internet Users in India.

Figure 8: Expected Growth of Mobile Internet Users in Future

The mobile Internet adoption in India will continue to rapidly rise in the near future. Urban as well as rural India will witness increased Internet usage in the forthcoming years. Moreover, the Government of India is also keen on inclusive growth, whereby the rural Indian is empowered with access to the Internet. Schemes such as CSCs, SWAN and NeGP serve as good examples with regards to the Government efforts. The mobile Internet channel promises to play a pivotal role in helping overall Internet adoption numbers in India in the foreseeable future.

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Methodology
The research team at eTechnology Group with IMRB International conducted the research in two steps, Primary and Secondary Research. 1) 2) Primary Research Secondary Research

Primary Research was conducted through surveys among various households in 30 cities. This helped to understand the penetration of mobile Internet usage in terms of claimed mobile Internet users and active mobile Internet users in India. Active Mobile Internet users were further interviewed to understand the applications accessed on the Internet through mobile, the frequency of accessing each application, typical mobile bills, the type of mobile Internet plans availed and so on. Surveyed Cities by Strata Delhi & NCR (Faridabad, Gurgaon & Noida), Top 8 Metros Mumbai, Chennai, Kolkata, Bangalore, Hyderabad, Pune and Ahmedabad Patna, Cochin, Vadodara, Lucknow, Ludhiana, Small Metros Coimbatore, Jaipur, Indore, Surat, Nagpur, (More than 1 Million Population) Vishakapatnam Non Metros Guwahati, Bhubaneshwar, Raipur, Chandigarh (Between 0.5 to 1 Million Population) Small Towns Kolhapur, Bellary, Thrissur, Panipat (Less than 0.5 Million Population)

Secondary Research was conducted through paid databases, annual reports of various telecom operators, websites of regulatory bodies such as TRAI, DoT (Department of Telecom), press releases, business news, articles and IMRB reports. Information collected from secondary as well as primary research was thoroughly analyzed in preparing the report.

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About IMRB International and IAMAI

eTech Group | IMRB (a specialist unit of IMRB International) is a research based consultancy offering insights into IT, Internet, Telecom & emerging technology space. Our continuous link with industry and a constant eye on the pulse of the consumer ensures that we can decode the movements of technology markets & consumers. To our clients we offer an understanding of the present market environment and a roadmap for the future.

Contact Details

Research Team for this Report Balendu Shrivastava, Group Business Director (balendu.shrivastava@imrbint.com) Tarun Abhichandani, Group Business Director (tarun.abhichandani@imrbint.com) Harshal Deorukhkar, Research Manager Archana Swaminathan, Associate Research Manager

eTech Group | IMRB

IMRB International A Wing, Mhatre Pen Building Senapati Bapat Marg, Mumbai Tel: (91)-22-24233902 www.imrbint.com

About Internet and Mobile Association of India (IAMAI) The Internet & Mobile Association of India (IAMAI) is a not-for-profit industry body registered under the Societies Act, 1896. Its mandate is to expand and enhance the online and mobile value added services sectors. It is dedicated to presenting a unified voice of the businesses it represents to the government, investors, consumers and other stakeholders. The association addresses the issues, concerns and challenges of the Internet and Mobile economy and takes a leading role in its development. The associations activities include promoting the inherent strengths of the digital economy, evaluating and recommending standards and practices to the industry, conducting research, creating platforms for its members, communicating on behalf of the industry and creating a favorable business environment for the industry. Founded in January 2004 by leading portals in India, IAMAI in the only specialised industry body in India representing the interests of online and mobile value added services industry.

Contact Details

Dr. Subho Ray, President, IAMAI 406, Ready Money Terrace, 167, Dr Annie Besant Road, Mumbai - 400 018 Tel: +91-22-24954574 | Fax: +91-22-24935945 | http://www.iamai.in

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Mobile Internet in India - 2011