Is India Reaching The Saturation Point For New Mobile Subscribers?

Today, mobile has become synonymous with smartphones in the urban context. In Indian cities, smartphones are used for everything from payments to shopping to entertainment to commuting to dating to socialising and simply communicating with friends. But feature phones which don’t always support such a wide range of features and apps have also been on a growth trajectory for the past two years, thanks to millions of new telecom subscribers who are finally able to afford mobile internet plans.

But even as Reliance Jio disrupted the telecom markets and the revenue prospects of the incumbent players, it also threw a big curveball to the whole market. With rampant onboarding on new users, India could be reaching a saturation point when it comes to new mobile subscribers.

In its last report telecom regulator TRAI revealed that India has 1.16 Bn wireless or mobile telecom subscribers, out of a population of between 1.3 and 1.4 Bn. On the face of it, mobile penetration seems to have reached a saturation point.

Hitting The Telecom Ceiling

That’s something Tarun Pathak, associate director with Counterpoint Research, also indicate. Pathak told Inc42 that India’s subscriber ceiling is 900 Mn after excluding those who can’t buy a mobile number due to economic reasons or due to their age. He added that mobile phone penetration has reached 85%-90% of the 900 Mn subset and the growth could become stagnant.

In fact, this is backed by TRAI’s most recent data which shows that the number of mobile subscribers has seen a 1.85% decline in monthly growth rate, and the total has fallen by 21.87 Mn subscribers in March 2019.

According to the Cellular Operators’ Association of India (COAI) director general Rajan Mathews, this drop is due to a combination of factors such as subscribers with multiple SIMs making a decision to move to a single mobile number. He added that telecom companies removing unused SIMs and users of low-value plans has also been a factor in this decline.

Mathews told Inc42 that India has close to 700 Mn unique mobile telecom subscribers out of the total of 1.16 Bn subscribers. This indicates that the rest 400 Mn odd are duplicate or multiple SIM connections. In this context, it is to be noted that in India, the share of dual-SIM phones in India is 66.61%, which is the highest in the world. Notably, even beyond dual-SIM phones, Indian mobile usage also involves having multiple phones with multiple SIM connections, which is a popular practice in cities.

Major Decline In March 2019

Over the last few years, the splendid mobile and telecom growth in India has come at a faster pace in rural areas than in the urban sector. But at the same time, the number of subscribers has gone down significantly in the rural sector.

As of March 2019, 55.98% in India were urban subscribers totalling 650.49 Mn, but the number declined in March, with a net loss of subscribers being 6.09 Mn. In the rural sector, the number of users was 511.32 Mn, with a fall of 0.13% in March 2019 thanks to the loss of 15.78 Mn subscribers.

The decline in mobile subscribers is the first in 11 months after the last major loss of subscribers in April 2018. In April 2018, the total telephone subscribers was 1125.07 Mn. At the same time, telcos lost 58.34 Mn subscribers, which was a 4.93% fall overall. Of this, urban subscribers were 624.52 Mn, after losing 40.78 Mn users in the month i.e. 6.13%.

When looking at the overall larger trend for a total population of 1.3 Bn, this number has fluctuated from 1.03 Bn in 2016, 1.17 Bn in 2017, 1.18 Bn in 2018 to 1.16 Bn in 2019.

Urban Sector Slowdown

Further, the urban and rural divide has come to 55% and 45% respectively. The trend of growth/decline for the urban and rural segment also has a lot to say.

While in urban areas, the growth after Jio’s launch in 2016 has reduced marginally over the last three years— 672.42 in 2017, 662.18 in 2018 and 650.49 in 2019— rural subscribers have continued to grow, up 15% from 444.84 Mn users in 2016 to 511.32 Mn users in 2019.

Looking deeper, it could be noted that after a peak of growth of 14% between 2016 and 2017, the urban mobile subscriber base has continued to fall 1.5% and 1.7% over the last two years till March 2018.

At the same time, the decline is also seen in the rural sector with 11.89% growth in March 2017, followed by 4.7% growth in March 2018 and finally in a 1.9% decline in the latest figures released by TRAI for March 2019.

However, even as India hits a ceiling for new mobile users, internet consumption is expected to go up tremendously. The Internet and Mobile Association of India has said in its report that India’s internet users expected to register double digit growth to reach 627 Mn in 2019, driven by rapid internet growth in rural areas. As discussed above, India has almost 700 Mn unique mobile users.

Talking to Inc42, Nilotpal Chakravarti, AVP, IAMAI said that if India is hitting a ceiling of sorts for telecom growth, the trend will be towards people upgrading from feature phones to smartphones, especially as smart home and IoT platform penetration increases across India. Chakravarti was quite clear that while urban users will continue to use more and more internet, the real big growth spurt will come from legions of internet users in rural areas.