Which Mobile Data / Internet Tech will Dominate in India – 3G or 4G ?

India Mobile Internet 3G Vs 4GWe wanted to Analyze which Technology in Mobile Internet / Data will dominate in India – 3G vs 4G ? The backdrop for this question is the aspirations and affordability of masses in India as we read YoY that Maruti Alto, which is an 800 CC car is still the largest selling car despite several competitive hatchbacks competing in the market.

Though 3G smartphones are now available at a price point of Rs3,600, only 10% of Indian mobile subscribers use 3G services. We believe the mass market requirement in India is to access mobile internet on a 5-inch or smaller-screen smartphone. We believe a 3G HSPA network in 900 MHz is likely to drive data consumption over the next 2-4 years. Additionally, single-base-station mobile data traffic modelling suggests that HSPA+ is capable of handling data traffic until data subs penetration reaches c50% and data usage about ~ 1.5GB/month.

According to the 2015 Cisco VNI mobile report, 7% of global mobile connections as of December 2014 were 4G, while 31% were 3G. Cisco expects 3G to be the dominant technology by 2019F, with 48% of global mobile connections on the 3G platform and 31% on 4G.

In most countries where LTE is currently deployed, 3G continues to be the fall-back technology, as LTE network coverage is patchy. In our view, LTE deployment is largely concentrated in areas where data consumption is high and affordability is favourable, limiting the roll-out potential to a few cities in India at present. 4G LTE networks are likely to be more relevant in 3-5+ years as handsets become more affordable. Achieving Stability of 4G-LTE network is going to be an herculean task for greenfield operators like Reliance Jio.We therefore conclude that 3G in 900 MHz will be the dominant technology in India over the next 2-4 years (mass adoption). In the longer term, we have no doubt that India will evolve into a 4G market.

The Handset Eco-System Matters
Also, based on Nokia networks, there are about 5.5m LTE devices in India currently, representing LTE device penetration of 0.6%. There are 1,960 3G devices available in India currently compared to 296 4G devices. There are only 10 4G mobile devices in India below US$160 compared to 661 3G devices, while below US$80 there are 205 devices compared to zero 4G devices

We think India will follow the natural technology adoption cycle (though the duration of the cycle may shorten with time) and 3G will be the dominant technology over the medium term (4 years). We believe India will eventually migrate to ALL 4G-LTE Network over the next 10 years. What say ?

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