With combined subscriber additions of 76 million in the first quarter of 2007, India and China represent two of the world’s fastest growing telecom markets. While China has been way ahead in pushing telecom growth, India is fast catching up. In the quarter ended September 2006, India outstripped China in terms of mobile subscriber additions (17 million new subscribers in India compared to 16.8 million in China).
Accounting for 40 per cent of the world’s population, the two countries are estimated to have a subscriber base of about 1.2 billion by 2010, with India claiming 438 million and China 750 million.
Comparison and trends
Mid-2007, India started recording a hefty 8 million plus monthly mobile subscriber addition as companies launched new schemes and increased penetration to rural and semi-rural areas. This pushed up India’s position to number three globally in terms of total subscriber base (fixed and mobile), which, as of August 2007, stood at over 241.02 million, depicting a growth rate of 95.6 per cent from August 2006 to August 2007.
China on the other hand, with a total mobile subscriber base of 515.67 million as of August 2007, is undoubtedly the world’s largest telecom market. The country’s mobile sector has grown at a rate of about 18 per cent from August 2006 to August 2007.
While India has 12 players in total, eight in the GSM segment and four in CDMA, the telecom sector in China is limited to only two players, China Mobile and China Unicom (GSM and CDMA).Of the two, China Mobile has traditionally dominated. It had nearly 69 per cent market share as of August 2007. In comparison, ever since the sector was opened up in India, none of the players has managed to capture such a high market share.Bharti Airtel has been the dominant player with a market share of 24.15 per cent as of August 2007.
China Mobile’s leadership position in the wireless sector is also reflected in its revenues. From 37 per cent of total telecom sector revenue (which consists of earnings from two fixed line and two mobile players) in 2003, it now accounts for 44 per cent. In the Indian case, Bharti Airtel accounts for the major share of total telecom revenues.
In both countries, GSM is the dominant technology. While it accounts for about 92 per cent market share in China, over 70 per cent of the Indian wireless market banks on GSM.
However, despite explosive subscriber and revenue growth, Indian mobile average revenue per unit (ARPU) continues to fall rapidly. Both GSM and CDMA operators are facing declining ARPUs. In China on the other hand, GSM ARPUs grew during the second quarter of 2007 due to the rapid uptake of data services. A key growth driver for China’s wireless market has been valueadded services (VAS), which contributed revenues of over $1.7 billion in 2007.
Unlike wireless, the growth trend in fixed line has been similar for both countries. In China, fixed line operators are losing customers, facing flat to declining revenue growth as the dual impact of fixed wireless and IP substitution is taking hold. Similarly in India, the wireline sector has become more or less stagnant.In absolute terms though, the figures differ with 372.45 million wireline subscribers in China and 37.93 million in India as of August 2007.
Looking at mobile penetration, while China has a teledensity of 67.58 per cent as of August 2007, India lags way behind at 21.2 per cent. The good side of this is that it leaves India with greater mobile growth potential.
To cope with the continuous tariff drops faced in both countries, operators have to necessarily look at other sources of revenue such as VAS. While on an average, VAS accounts for about 22.6 per cent of the total operator revenues in China, in India it trails behind in the 10-12 per cent range.
While China has undoubted growth potential, its telecom market is largely state owned and does not have the benefits of a truly free competitive market. India, in comparison, offers a relatively open telecom market with 74 per cent foreign direct investment permitted.
Although 3G continues to be a focal point in China, it is believed that the delays in getting the domestic 3G standard TDSCDMA ready for prime time will continue to push back the issuance of 3G licences for all three kinds of 3G technologies.
Likewise, the telecom sector in India has been keen that the 3G policy gets off the ground. The reasons for the delay include a huge spectrum crunch and the government’s need to balance the interests of the incumbents and the new entrants.Once the defence forces release spectrum and the government announces the policy, 3G services are expected to take off in no time. Most of the key players in the sector are either ready or in the process of builDing a 3G network. Similarly in China, where no 3G licence has been issued, China Mobile, China Unicom, China Telecom and China Netcom started preparing for 3G in 2006 and have invested in relevant IT software and hardware. It appears that in China, 3G will be launched by late 2008.India is looking to launch 3G by mid-2008.
Outlook
With the massive rollout of wireless networks in India, the rising trend in subscriber additions is expected to continue.In comparison, China’s wireless subscribers are most likely to increase at a decreasing rate.
Based on a presentation ?Outlook for India and China Telecom Markets? by Duncan Clarke, chairman, BDA.
