After Jio 4G Entry The share of smartphones in overall mobile phone shipments is expected to jump to 75% from the current 45%

The upcoming launch of telecom services by Reliance Jio Infocomm Ltd will boost smartphone sales in India but the telco itself will face hurdles once it starts mass services, brokerage firm CLSA said.
The share of smartphones in overall mobile phone shipments is expected to jump to 75% from the current 45% once Reliance Jio launches its services, the Mumbai-based firm said in a report released on Monday.
For comparison, smartphones were just 6% of overall mobile shipments in the first quarter of 2011-12.
The 23 November report by telecom analysts Deepti Chaturvedi and Akshat Agarwal says smartphone sales have soared as users replaced their feature phones. Shipments of feature phones have declined along with the sharp growth in smartphone shipments.
“This is reflected in the mobile shipment data for fiscal year 2015 wherein total mobile shipments declined by 2% YoY (year-on-year) to 252 million and smartphone shipments grew by 58% YoY to 86 million,” the report said. “However, note at the present, despite approximately 20% smartphone penetration, 3G penetration still lags at 12%.”
The analysts expect Bharti Airtel Ltd to make the most of India’s data boom.
The report further points out the key difference between Reliance Jio and the top three incumbents: While Reliance Jio will be a new launch of 4G technology-based services, Bharti, Vodafone India Ltd and Idea Cellular Ltd are launching 4G as an overlay on existing 3G or 2G networks with established voice offerings.
“For Reliance Jio, the key is the spectrum trading deal for 800MHz in 12 circles with Reliance Communications Ltd enabling a voice/VoLTE (Voice over LTE or 4G) offering. VoLTE is yet to be launched even in China and even after Reliance Jio will launch commercially, users will need 4G VoLTE phones and interconnecting to incumbent voice networks will be key,” the report said.
There are no VoLTE phones currently available in the Indian market, though Reliance Jio is expected to launch its own LYF-branded device for that purpose.
On the overall data front, CLSA expects that by December 2018, the top three operators will continue to gain share and account for 73% of sector revenue, and data revenues to nearly triple to $14 billion.
Reliance Jio will, however, also face the daunting task of convincing 4G users, using the bundling and subsidy route to adopt new handsets, at a time when 95% of mobile subscribers are prepaid with an Arpu (average revenue per user) of Rs.160 per month. “We maintain that switching to 4G handsets in this low-Arpu prepaid market and wide consumer acceptance of 4G/VoLTE will remain the key hurdles for the new entrant,” the report said.
CLSA expects that data will drive revenue growth for the industry, continuing the trend of the last two years. “Over FY15-18, we expect industry revenues to grow at 10% CAGR to $37 billion, driven by a sharp 40% CAGR in data revenues to $14 billion,” the report said.
CLSA expects the data subscriber base to grow at a compounded annual growth rate (CAGR) of 27% to 519 million subscribers by 2018, from 198 million clocked in the last financial year.
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