The $45 Billion Opportunity In India's Broadband Market

By AltG Research On Behalf Of Poornima Vardhan And Taponeel Mukherjee

As India rapidly moves forward with economic growth and opportunities, investors need to keep an eye on the "Sunrise Sectors" - opportunities that are much larger than they appear to the common eye, driven by higher incomes and technology adoption.

What Is The Opportunity?

India's fixed broadband subscription space presents an opportunity via growth and fragmentation.

The Indian fixed broadband subscription industry offers a lucrative opportunity for consolidation and expansion, owing to its immense growth potential and a high degree of fragmentation.

The wired broadband market in India is highly fragmented, with the top three players, Jio, Airtel, and BSNL, accounting for just over half of the market share at 51%. In contrast, the top three players dominate the wireless market, holding a staggering 97% of the market share. With the remaining 37% of the wired broadband market controlled by a multitude of smaller players providing ISP services via ISP and UL-Virtual Network Operator License, there is a significant opportunity for consolidation and growth in the industry.

Despite the dominance of major telecom players in the market, there exist over 600 ISP license and UL-VNO license holders that are a significant component of the market, thereby creating a vast landscape that is ripe for consolidation.

How Big Is The Market Potential?

With India's wired broadband subscriber base reaching close to 30 million, there exists a massive opportunity for growth as the country's per capita income surpasses USD 2000, signalling a rise in consumption. The gap between India's numbers and China's 590 million wired broadband subscribers presents a chance to emulate the tremendous growth in communication services expenditure that China witnessed over the last two decades. In the paper "Consumer Spending in China: The Past and the Future", Jun Nie and Andrew Palmer showed that as household spending in China increased 3x (realistically) in the 15 years since 2000, the expenditure on transportation and communication services jumped 7x. By tapping into this latent potential, India can revolutionize its wired broadband market.

What is the potential market capitalization that can be achieved?

Assuming an Average Revenue Per User (ARPU) of INR 400 per Month or approximately $5 gives us an annual ARPU of $60. Assuming that India gets halfway to China's numbers in the next 10-15 years, we see a 300 million subscriber base with USD 15-20 Billion in revenues. Applying a conservative 5% Net Profit Margin and a P/E of 45, there is $45 Billion of market capitalization to be created. Another way to look at this is if you can roll up and get 2% of the growth, you have a Billion Dollar valuation.

In conclusion, India's wired broadband market is a sunrise sector offering massive potential for growth, consolidation, and expansion. With rising incomes, technology adoption, and a fragmented landscape, there exists a staggering opportunity to create up to $45 billion in market capitalization.