This article is a detailed rationale beahind the smallcase Digital Inclusion. This smallcase includes companies from segments like cable/broadband, equipment manufacturers, network carriers & operators and infrastructure providers that are most likely to benefit from increasing internet usage.
Let’s see why this smallcase looks promising for the long-term.
Internet service providers in India can be broadly categorized as:
Above mentioned companies in each category is termed as a network operator or a carrier. Amongst these companies some like Airtel operate in all modes, whereas others focus only on providing one kind of service.
The value chain for data penetration is comprised of carriers/broadband providers, infrastructure providers and equipment manufacturers.
Growth so far
- At 481 million users in March 2017, India currently has the 2nd highest number of internet users in the world
- In spite of the high number of users, internet penetration in India remains low at 35.03%, compared to countries like China (52%), USA (88%) and UK (93%)
- According to IBEF, number of internet subscribers in India grew from 8.6 million in 2006 to 343 million in 2016 at a compounded annual growth rate of 44.5%. With the increase in internet usage through affordable mobile devices and robust increase witnessed in rural penetration, number of internet users is expected to increase further to 730 million by 2020, according to a latest NASSCOM report
- Broadband subscription also increased at a compounded annual growth rate of 23.3% between financial year 2007-2016
Drivers of increasing data penetration
- Growing income per capita and a young population is fueling demand for data usage
- Availability of affordable smartphones and lower data rates are further bolstering the demand
- Strong policy support such as reduction in license fees, relaxed FDI norms, enhanced spectrum limit have been providing tailwind
- Untapped rural market and accelerated development in the latest technology are pushing data services deeper into the economy. For example, launch of 4G services by Airtel, BSNL, Reliance Jio in 2015