X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Internet: Webbing India’s future - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Dec 12, 2006

    Internet: Webbing India’s future

    A recent study paper of the TRAI (Telecom Regulatory Authority of India) on Internet usage in the country, paints a sorry picture. The report states that although the government has missed its target of total Internet subscribers in the country only by a whisker (targeted 6 m, achieved 5.5 m) for 2005, it has missed out on its broadband subscribers target by a mile (targeted 3m, achieved less than 0.2 m).

    Facts and figures
    As per a TRAI report, the number of Internet users at the end of June 2006 was 7.7 m, including the broadband base of 1.5 m. If the authorities plan to meet the target for March 2007 of having 18 m Internet and 9 m broadband subscribers, the total base in the country will have to grow by 1.14 m and 0.8 m per month respectively.

    Internet: Target Vs Actual
    Internet subscribers (incl. broadband) (m) Broadband subscribers (m)
    Year Targeted Achieved Targeted Achieved
    2005 6.0 5.5 3.0 0.2
    2007 18.0   9.0  
    2010 40.0   20.0  
    Source: TRAI

    So, what has caused the inability of the Internet market to grow in India in line with the growth rates achieved by the mobile telephony segment? Past data shows that there is a clear-cut relation between Internet penetration and economic development. Internet penetration has been the highest for nations that have a high GDP per capita (see table below). However, GDP is not the only factor in determining the level of Internet penetration. For instance, Korea's GDP per capita is way below that of Japan but the former still has a higher Internet penetration than the latter. There are other factors like local government (regulator) policies advocating a faster growth of the industry, higher share of the services (like IT and financial services) economy, and existence of companies that can provide robust Internet platforms for the growth of this segment. As far as the Indian economy is concerned, the fact that we are moving towards a higher growth trajectory makes it a very opportune time for the Internet era to usher in more rapidly and effectively.

    Internet Penetration (2000)
    Internet
    penetration (%)
    GDP per
    Capita (US $)
    US 55.3% 30,600
    Singapore 51.9% 29,610
    Hong Kong 49.9% 23,520
    Japan 30.5% 32,230
    Korea 35.0% 8,490
    India 0.4% 450
    Source: Asia Network Research

    Although there has been some linkage between GDP levels and Internet penetration, the penetration of broadband (which has a minimum transmission speed of 256 kbps) into the country is not direct fallout of the GDP levels. Once again looking at the past data, we realise that Korea, which has the highest penetration levels of broadband, has got per capita GDP that is way below that of the advanced counties of the West. So, what caused the exponential rise there? It was the aggressive policies of the government, the highly competitive markets and loans to service providers to provide high-speed access networks. Contrast this with India. While we do have a broadband policy in place, not much has been done on the implementation front (the results are there to be seen).

    Conclusion
    As India increasingly moves into the digital space, the Internet is set to play an increasingly important role in the growth of the economy, by way of high-speed access to communication (data and voice). The strong growth in the size of e-commerce (business done through the Internet medium) market over the past few years is a reason compelling enough for the government to sit up and take serious note of this issue. As per the TRAI, the e-commerce market in India, which stood at a size of Rs 1.3 bn in 2002-03, is estimated to grow to Rs 23 bn by the end of 2006-07, representing a compounded annual growth of 105%. With further strong growth expected in this market in the future, there can be no denying that the current slow pace of Internet penetration in the country will act as a major roadblock for this growth.

     

     

    Equitymaster requests your view! Post a comment on "Internet: Webbing India’s future". Click here!

      
     

    More Views on News

    Bharti Airtel: A Good Quarterly Performance (Quarterly Results Update - Detailed)

    May 6, 2016

    Bharti Airtel has reported a8.4% YoY growth in the topline and an increase of 2.8% YoY in the bottomline for the quarter ended March 2016.

    Bharti Infratel: Ends the Year Positively (Quarterly Results Update - Detailed)

    Apr 27, 2016

    Bharti Infratel has reported a 7.3% YoY growth in the topline and an increase of 18.7% YoY in the bottomline for the quarter ended March 2016.

    Bharti Infratel: A Good Quarter (Quarterly Results Update - Detailed)

    Apr 8, 2016

    Bharti Infratel has reported a 4.9% YoY growth in the topline and an increase of 11.5% YoY in the bottomline for the quarter ended December 2015.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    S&P BSE TECK


    Aug 18, 2017 (Close)

    S&P BSE TECK 5-YR ANALYSIS

    COMPARE COMPANY

    MARKET STATS