Telcos turnover to get $8-billion boost from data, reveals Google

Written by fe Bureau | Mumbai | Updated: Aug 22 2014, 16:11pm hrs
SmartphonesIt is estimated that in three years, smartphone penetration will grow six times to reach 385 million people, a joint study by Google and AT Kearney states. (Reuters)
Indian mobile telephony firms can generate an additional aggregate turnover of $8 billion and operating profit of $3 billion over the next three years by offering data-based internet services across mobile devices, a joint study by Google and consulting firm AT Kearney states.

The study, which was released on Thursday and titled Creating the Next Multibillion Dollar Online Opportunities in Telecoms, states that Indias mobile internet user base stands at 155 million people at present and will more than double to 480 million by 2017.

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It is estimated that in three years, smartphone penetration will grow six times to reach 385 million people and the number of users who transact online will grow to 160 million, the report said. Data consumption on mobile phones will triple, and consumers will be buying five times the content they do at present by 2017, it added.

By FY17, the Indian telecom industry is expected to reach $35 billion in revenues, with data revenues growing at over 70% per year till then and new digital value-added services (VAS) streams emerging and growing exponentially, Nikolai Dobberstein, a partner at AT Kearney, said.

Going by the Google-AT Kearney report, revenues from data services should account for 21.6% of the overall turnover for telcos in India by FY17. If this were to be achieved, it would be a significant jump in the proportion of turnover contributed by data services.

At present, data services contribute 10-15% of revenues for individual telecom firms.

The roll-out of third-generation (3G) internet services for mobile devices has been largely responsible for driving this phenomenon (though 3G services were slow to pick up in India). The digital boom was also aided by the launch of several mobile devices like smartphones and tablets across price categories by international and domestic equipment makers.

Content across genres like news, entertainment, sports and games is being delivered to Indian smartphones users with millions of applications (popularly called apps) being designed for different platforms like Googles Android and Apples iOS.

Even as telcos are busy chalking out strategies to expand the market for 3G services in towns and cities other than the top metros, the Mukesh Ambani-led Reliance Jio Infocomm is threatening to shake up the market with the launch of fourth-generation (4G) broadband wireless services later this fiscal.

During his address to shareholders at Reliance Industries annual general meeting in June, chairman Ambani called Reliance Jio a Rs 70,000-crore initiative that would cover all states in India, with 5,000 towns and 2,15,000 villages.

However, some industry executives say that a meaningful pick-up in the demand for 3G services in India may be four to five years away.

Himanshu Kapania, managing director and chief executive of Idea Cellular, the Aditya Birla Groups mobile telephony arm, told FE that despite being an 18-year-old technology in India, the penetration of second-generation (2G) data services in India stood at only 64%.

Kapania also pointed out that though 80-100 million people had bought 3G-enabled smartphones in India, only 60 million of them actually used 3G services.

However, as the mindset of Indian smartphone users change, data services can expect to gain greater traction.

Similarly, 70% of internet users (in India) have not yet tried online recharges but are willing to try it because of the inconvenience they face with traditional (payment) channels, Google Indias managing director Rajan Anandan said in a statement.