By Inderpreet Kaur, Analyst, Asia Pacific, Ovum

India is the second largest mobile market in the world after China in terms of subscriptions. Ovum expects the country to touch the 1 billion mobile subscriptions mark by 2016, driven largely by 2G net additions. While 2G accounts for the majority of total mobile subscriptions, the take-up of mobile broadband is expected to grow strongly over the coming years. According to Ovum’s Mobile Subscriptions forecast, mobile broadband subscriptions will grow at a compound annual growth rate of 50 per cent during 2014-19. Currently, 3G accounts for 14 per cent of total mobile subscriptions; however, it will represent over 45 per cent of the subscriptions by 2019.

Bharti Airtel’s proportion of 3G data subscribers increased to 8.1 per cent in March 2015, compared to 4.7 per cent a year earlier, while Idea has 12 per cent of its total subscribers on its 3G network. In addition, the adoption of smartphones has grown substantially, with operators reporting 20-25 per cent smartphone penetration on their networks. This has resulted in an exponential increase in data traffic on operator networks. For Idea Cellular, 3G data volumes grew 2.5 times over the past year while the total data volume (2G and 3G) doubled during the same period. The growth in 3G data traffic on Idea’s network occurred despite the fact that only 40 per cent of 3G-enabled device subscribers are active data users. These facts provide enough evidence that mobile users in the Indian subcontinent are maturing, and that a large-scale subscriber migration to superior mobile technologies will be witnessed in the coming years.

The lack of continuous spectrum in the 1800 MHz and 900 MHz bands (sufficient to offer mobile broadband services) was often cited as a reason for the sluggish growth of 3G by Indian operators. In its 2015 auction, the Indian regulator established its intent to encourage competition in the mobile data services market by auctioning continuous spectrum blocks in the 900 MHz and 1800 MHz bands. As a result of this, operators have launched 3G using the 900 MHz spectrum, which offers superior data services, particularly to indoor users. The government is also working on freeing up airwaves in the 700 MHz band, and another spectrum auction is expected in late 2015 or early 2016. Using internationally harmonised bands for offering 3G and 4G services will set the pace for technology adoption in the country as  operators benefit from the evolved device ecosystem. An example of this has been demonstrated by Airtel, which recently concluded a joint procurement contract with China Mobile for buying 4G devices. Indian operators have been using the 2300 MHz band for the delivery of 4G services; however, following the February 2015 auction, they are expected to launch 4G in the 1800 MHz and 2600 MHz bands.

While migrating the early adopters of mobile internet services residing in the metros and Tier I cities (who are now high-end 2G data users) to 3G and 4G networks will be quick, introducing the next set of subscribers to mobile broadband will prove to be an arduous task, and one that demands operators’ attention over the mid to long term. Operators thus need to carefully balance their investments in expanding network reach/coverage and improving their service quality in key areas. In the metros, operator investments are largely aimed at upgrading 3G networks to offer better penetration (indoor coverage) and superior network quality. Bharti Airtel recently launched the Platinum 3G service in Mumbai, which combines spectrum in the 900 MHz and 2100 MHz bands to offer better 3G speeds and connectivity at the existing 3G tariffs. Similarly, Idea Cellular chose the 900 MHz band to launch 3G services in Delhi in order to offer better indoor coverage and superior service quality. Vodafone, on the other hand, is focused on expanding its 3G network in the Uttar Pradesh circle and aims to bring more residents on its 3G network.

While these factors are helping in accelerating the adoption of 3G services, the monthly data consumption per subscriber in India also needs to be taken into account. At present, this figure is very low as compared to those in the data-driven mobile markets across the globe. For instance, Idea reports its average 3G data usage per subscriber per month to be in the range of 300 MB, compared to the 1 GB average monthly consumption per subscriber on the networks of South Korean mobile operators. To justify the huge investments made in spectrum and network roll-outs, operators need to increase the existing levels of data usage among current subscribers, thereby driving ARPUs (mainly from high-end data users). Over-the-top content services will play an important role in this, and Indian operators need to effectively bundle various content services to match the profiles of various users.