Two independent research studies have found that a spending weakness has resulted in slowdown in smartphone sales in rural areas, with the top-tier cities still constituting a major proportion of smartphone sales. However, inflation has not dented data consumption in the rural regions.
In 2022, 35-40% of the 122 million smartphones sold in the country were bought in rural India, according to research firm IDC India. The share remained consistent in the first quarter of 2023, with 37.2% of the 24 million smartphone sales recorded in rural areas.
In the January-March quarter, only about three of every 10 5G smartphones sold in the country found takers in rural India, IDC India found.
Feature Phones in Demand
Navkendar Singh, associate vice president at IDC India, said that although the rural-urban split is not linear across the country, the rural share was growing till mid-2021 before stagnating at 35-40% of total sales.
As per a survey conducted by IIFL Securities in villages along the Mumbai-Nashik highway in Maharashtra, increasing smartphone prices have dented sales, with the best-selling phones falling in the Rs 10,000-15,000 price range.
Although the retailers surveyed had stocked Reliance Jio’s 4G smartphone, sales remained poor despite a 25% price cut from the originally listed price of Rs 6,499, the report said, adding that the sales were robust in 2018 and 2019 but have slowed to a trickle now.
“Some retailers stated that since Jio now sells the phone at Rs 3,000 to the retailer, end-user pricing is still much higher than 2G handsets, making affordability a challenge,” said IIFL Securities.
IDC’s Singh said the rural and suburban areas adjoining the major cities still have demand for 2G and 4G feature phones, primarily because of the higher pricing of 4G models and the convenience of using feature phones over smartphones.
“Rural users find feature phones more convenient to use for voice calls due to a low cost of ownership, longer lasting batteries. The uneducated masses, especially females, find smartphones more complicated to use,” Singh said.
The IIFL Securities report corroborates this, saying users have not returned the 4G feature phone launched by Jio after three years of use, despite the option to get back the Rs 1,500 security deposit that had to be paid by the customers to purchase.
The phenomenon is in sharp contrast to urban areas where increasing demand for 5G smartphones has driven up the average selling prices (ASP) to an all-time high of $265 (about Rs 21,000), as per IDC. The research firm said the share of higher-priced smartphones (above $600) increased to 11% compared to 4% a year ago, while 5G smartphones constituted 45% of all shipments in the first quarter of 2023, up from 35% in the previous quarter.
IIFL Securities also surveyed stores in Mumbai and found that users saw tangible benefits in 5G over 4G in the form of a lack of buffering while watching videos. The report said increasing smartphone prices have been cushioned in urban areas like Mumbai with the availability of financing schemes.
In addition, the absence of 5G networks in villages has restricted the appeal of 5G handsets.
“Also, the limited use cases and higher ASP of 5G devices will restrict the growth of 5G handsets in rural areas for some time, despite network availability,” Singh said.
Data Consumption Intact
IIFL Securities said “rising smartphone prices have dented sales, but mobile top-ups have also not seen any slowdown despite the macro weakness, since connectivity is a basic need”.
It said most rural consumers go for tariff plans offering 1.5GB data per day, with the daily data limit consumed on YouTube and social media, and more recently, watching IPL matches on their mobiles.
