India mobile shipments in 1QFY20 were down 11% YoY to 69m led by a sharp 40% YoY fall in 4G feature phones. However, smartphone shipments increased by 10% YoY to 37m and, for the first time, were more than 50% of total mobile shipments on acceleration in migration from feature phones to smartphones.
Smartphone user base set to expand
We expect India’s smartphone user base to expand from around 368m as of June 2019 to 507m by March 2022, and data subscribers to grow higher at 44%. This will boost adoption of bundled plans (voice + data), which in turn will drive sector Arpu recovery.
Smartphones shipment ahead of feature phones
Assuming a two-year replacement cycle, the migration from feature phone to smartphone has picked up, with average quarterly feature-phone upgrades rising from 7.7m in FY19 to 8.9m in 1QFY20, implying that 4G feature phones have not impacted migration of feature-phone users to smartphones. That said, over 75% of smartphone demand continues to be driven by existing Smartphone. The share of smartphone shipments in the US$100-300 category has increased from 48% in 1QFY17 to nearly 75% in 1QFY20.