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Despite gaining on China, Indian mobile market has long haul

Posted: 15 Feb 2006 ?? ?Print Version ?Bookmark and Share

Keywords:David Benjamin? mobile telephone? third-generation? 3G?

India will surpass China in new mobile telephone subscriptions in 2006, but will continue to trail its technology rival in market potential for years to come, especially in lucrative third-generation (3G) services, according to an analyst.

Asian market guru Duncan Clark, speaking at the 3GSM Congress' Growth Markets Analysis Seminar early this week (Feb. 13), said December marked the first time India's new subscriber growth topped 5 million for the month. That total is considered routine among China's mobile operators, but it's a breakthrough in India.

Clark, managing director of BDA, a consulting firm, said that India will continue to crack 5 million per month in 2006, and will inch ahead of China overall in this growth measure. But he added that limitations inherent to the Indian market will pose practical and economic problems for mobile operators that China has long since solved.

Both India and China represent immense potential for growth. Clark projected a total subscriber population in China in 2010 of 617 million, and in India of 365 million. India's market today stands at 75 million, with a penetration rate of only 6.7 percent.

Rural areas in India propelled the December jump in subscribers indicating, according to Duncan, a "propensity" for rural users to seek mobile services. The hitch in India is rural electrification, which is far from universal. As a result, India's mobile phone coverage capacity is only 22 percent. China, despite some power gaps of its own, currently has mobile coverage over 98 percent of its land mass.

Another lingering problem for India is regulation. For much of the 1990's, India maintained an onerous regime of licensing restrictions and taxes that straitjacketed the mobile industry. China, despite its reputation as the enemy of capitalism, was far more laissez faire. Said Clark, "China is very much run by bureaucrats, but it's not inefficient.... They've always managed to replicate the market without having the private sector in there."

Typical of this efficiency is China's expected industry consolidation during the 3G transition. Dongming Zhang, BDA research director, predicted that China will soon reduce the number of state-controlled phone operators from four to three. The country's primary mobile provider, China Mobile, will remain intact, but China Unicom will virtually disappear, as China Telecom absorbs its GSM services. China Unicom's CDMA network will be folded into a joint operation with China Netcom.

Meanwhile, India's mobile market continues to play catch-up. Even with the Telecommunications Regulatory Authority of India much friendlier than in the recent past, there are hindrances to both outside investment and internal innovation. A comparison to China shows a dramatic difference in how revenues are shared in the vital area of mobile data.

In China, 85 percent of revenues go to operators' content partners. In India, operators keep up to 80 percent. "You need to get fresh talent, new people in the industry," said Clark. "Will operators step back and allow [content] companies to flourish?"

As Clark explained, the similarities in China and India, in size, location and untapped potential are striking. But even more striking is the gap between the two countries' proven capacity for tapping that potential, a gap that will continue to favor China's mobile phone customers. The melding of these two giant telecommunications markets into onedubbed "Chindia" in some quartersis not, said Clark, credible.

- David Benjamin
EE Times

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