A Tale of Two Mobile Markets                           China & IndiaResearch. Technology. Strategy. Intellectual Property....
A Tale of Two Mobile Markets –China and IndiaNext weekend, on March 3rd around noon China Standard Time to be precise, Chi...
A Tale of Two Mobile Markets –China and IndiaIndia started its mobile journey late towards the end of the last decade but ...
A Tale of Two Mobile Markets –China and IndiaRegulators in both markets face key decisions on a number of vectors – 4G spe...
Race to a Billion          http://www.chetansharma.com   5   © Copyright 2012, All Rights Reserved. Copying w/o permission...
China+India in Mobile             China+India account for 37% of the global population         http://www.chetansharma.com...
China regains momentum & the lead         http://www.chetansharma.com   7   © Copyright 2012, All Rights Reserved. Copying...
Global Mobile Competitive Index    Source: Competition and Evolution of Mobile Markets.    http://chetansharma.com/mobilec...
Operators from China/India dominatethe global subscription rankings     Operators by Subs1    China Mobile2    China Unico...
ARPU: China – Steady, India - Nosedive          http://www.chetansharma.com   10   © Copyright 2012, All Rights Reserved. ...
China leads India on many fronts          http://www.chetansharma.com   11   © Copyright 2012, All Rights Reserved. Copyin...
Save The Date                          Sept 10th, 2012                             Seattle     Connected Universe. Monetiz...
Join Us                      March 28th, 2012                          SeattleHow Mobile is Changing Media, Commerce, and ...
ThanksChetan Sharma                                       Mobile Future Forwardchetan@chetansharma.com                    ...
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Mobile markets china_india_chetan_sharma_consulting

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Summary of the growth of the mobile markets in China and India over the last decade.

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Mobile markets china_india_chetan_sharma_consulting

  1. 1. A Tale of Two Mobile Markets China & IndiaResearch. Technology. Strategy. Intellectual Property. Thought Leadership Summits. http://www.chetansharma.com 1 © Copyright 2011, All Rights Reserved. Copying w/o permission is prohibited. 8/2011
  2. 2. A Tale of Two Mobile Markets –China and IndiaNext weekend, on March 3rd around noon China Standard Time to be precise, China will sign up its one billionth mobile subscription.India in the meantime, crossed the 900 million subscription mark in Feb. Roughly an year ago, India was adding subscribers at historicallyrecord pace of approximately 20 million subscriptions per month (that translates into a new Australian market every month) while Chinacontinued at its steady pace of 8-12 million net-adds per month. In Q1 2011, data indicated India might actually edge out China to reach the firstbillion landmark. Then, the market collapsed due to the intense competition, the pervasive corruption, and the accounting gimmicks.In 2011, the global GDP growth was 2.7% according to the World Bank. While the OECD countries saw only modest gains (1.7%), China (9.1%)and India (6.5%) accounted for a good percentage of the global growth. Buoyed by the rising disposable income, the middle class in the twobiggest countries are spending more than ever before.All of the top 6 global operators by subscriptions are from China and India. Collectively, they account for 27% of the global mobilesubscriptions and 12% of the global service revenues. In 2011, India added 141 million subscriptions while China netted 133 million.Having worked in both of these markets over the last decade, I have always seen China and India as two of the most dynamic mobile markets inthe world. They might seem similar on surface but are quite different underneath. Both represent vast human resources and the biggest middleclass with buying power. However, their competitive landscape is vastly different. On our Competitive Index (CI) scale of global markets, theyare on the extreme ends of the revenue and subscriber concentration indices. China is one of the least competitive mobile markets and India isby far the most competitive mobile market in the world.In China, China Mobile monopolizes the market with over 66% of the market. Regulators are trying to boost the other two operators ChinaUnicom and China Telecom but have a lot of work left on their plate. India on the other hand is a hot cauldron of intense competition, too muchcompetition if you ask the operators. There are 5 operators with roughly 100 million or more subscriptions with the Bharti Airtel at number 1but with less than 20% market share.China’s mobile journey began in the early nineties with the Ministry of Post and Telecommunications providing the telecom services as ChinaTelecom. In 1994, under pressure, China Unicom was introduced to the market but was largely a failure. Later in 1999, China Telecom was splitinto three businesses with China Mobile becoming the mobile arm. Recently, when the 3G licenses were granted, market was segmented into itscurrent form with China Mobile still leading the pack by a good distance.China’s overall growth for the past decade has been pretty steady staying between 8-12 million net-adds per month. Remarkably, the ARPU hasstayed fairly consistent at around $10. Data revenue started growing significantly in the last 3-4 years. China Mobile has been the number oneoperator by the number of subscriptions, the total revenue, and the market cap for many years now (it is more valuable than Google). In datarevenues, China Mobile has consistently ranked in the top 5 for the last 5 years. http://www.chetansharma.com 2 © Copyright 2012, All Rights Reserved. Copying w/o permission is strictly prohibited. 2/2012
  3. 3. A Tale of Two Mobile Markets –China and IndiaIndia started its mobile journey late towards the end of the last decade but after a series of market reforms and introduction of new players like Reliancein early 2000s, market caught fire. The lack of landline infrastructure, the declining $/min costs aided by the burgeoning middle class meant themarket was ripe for explosive expansion. In 2005, India was roughly 300 million subscriptions behind China but its per month net-adds has beeninching up steadily and by Q2 2007, India caught up with China in net-adds.While China’s mobile market growth continued at a steady pace, the Indian market leaped into high gear, breaking records month-after-month andcame tantalizingly close to China in Q2 2011 with only 55 million separating the two at the time. However, by then, the market retreat had alreadystarted. As we outlined in our Competition and Evolution of Mobile Markets research paper last year, the market composition and the intensecompetitive landscape was unsustainable. The cost to acquire a new subscriber started to become unbearably high. The rapid customer acquisition atany cost started to have a significant impact on operator profitability.Also, the heavy burden of regulatory levies meant that the regulatory charges are approximately 20-25% in India whereas in China they are negligible.This meant, virtually all the operators started veering towards the dangerous negative margin territory in 2011-12. Additionally, the pervasivecorruption reared its ugly head and a number of key players got caught up in the spectrum auction scandal. The bottom line is that the market is goingto stay in the state of “mess” for the next few quarters as it tries to clean things up and plan the next phase of growth and momentum. It can take solacefrom the fact that the open free market and legal framework is still attractive to the mobile ecosystem. The fact that Vodafone won the $2 billion taxcase should inspire confidence in the market.Not surprisingly, the intense competition had a significant toll on the overall ARPU in India. While China’s ARPU stayed constant at $10 for much ofthe decade and its data % increased to 27% in 2011, India’s ARPU plummeted from $11 in 2005 to $3 in 2011. Players like Reliance boast a subscriberbase of 150 million but the ARPU is < $2 leading to a meager 3.7% profit margin. However, many of the Indian operators are a part of the bigconglomerates so it is easier to absorb and hide the declining financials. Regulators must realize that the industry can stay healthy only if its playersremain financially viable. One has to look at mobile growth holistically. They must abolish outdates policies, rationalize the exorbitant levies, liberalizethe market further and outline long-term spectrum policy without delay.It is fairly easy to be fooled and seduced by the large numbers. However, these markets are not for the faint hearted. After the pleasantries are over, theunsuspecting and the unprepared will get chewed and spat out in no time. The feeble IP regimes make it even more problematic. But, it is 37% ofhumanity we are talking about. Markets are still attractive but one needs a strategic focus, strong local partners, and iron clad teeth to take a bite ofthese markets. Even established players can exhibit extreme naiveté in understanding the rules of the game. http://www.chetansharma.com 3 © Copyright 2012, All Rights Reserved. Copying w/o permission is strictly prohibited. 2/2012
  4. 4. A Tale of Two Mobile Markets –China and IndiaRegulators in both markets face key decisions on a number of vectors – 4G spectrum, competition, FDI, IP, broadband plan, and policies on anumber of fronts. Both countries have similar long-term goals but are inefficient in terms of regulations and capital allocation (they are notunique in this respect, even more advanced markets like the US have their share of quirks in the regulatory framework) needed for the nextphase of market and revenue growth.India is likely to cross its billionth mark by early 2013. The market will go through significant restructuring and self-correction over the courseof next two years. China will look to expand its 3G and 4G markets and bring broadband to the masses. The smartphone and data usage is onthe rise laying the foundation for the future transformation.China has been the bolder of the two. By deft coordination and shrewd strategy, the likes of Huawei and ZTE have shaken its western rivals intheir boots while protecting its local turf. India has been content with the services business though it is starting to ramp up its manufacturingand R&D capabilities. Indian operators have had better success at spreading their wings, investing in foreign markets and collaborating withforeign operators. China is somewhat closed but disciplined. India is mostly open but waffling.In the last ten years, China has become the 2nd largest economy in the world behind the US while India will edge past Japan to become #3.Given that mobile will have a central role in the ICT evolution of global markets particularly in the developing nations, what happens in themobile markets of China and India will influence rest of the world. (I just finished up a project for UN in this area, more to come).So, congratulations to China for the significant milestone and to India for its tremendous growth.The future of mobile data applications and services in China and India is extremely bright albeit tortuous.Tighten your seatbelts and enjoy the journey.Your comments are always welcomeChetan Sharma http://www.chetansharma.com 4 © Copyright 2012, All Rights Reserved. Copying w/o permission is strictly prohibited. 2/2012
  5. 5. Race to a Billion http://www.chetansharma.com 5 © Copyright 2012, All Rights Reserved. Copying w/o permission is strictly prohibited. 2/2012
  6. 6. China+India in Mobile China+India account for 37% of the global population http://www.chetansharma.com 6 © Copyright 2012, All Rights Reserved. Copying w/o permission is strictly prohibited. 2/2012
  7. 7. China regains momentum & the lead http://www.chetansharma.com 7 © Copyright 2012, All Rights Reserved. Copying w/o permission is strictly prohibited. 2/2012
  8. 8. Global Mobile Competitive Index Source: Competition and Evolution of Mobile Markets. http://chetansharma.com/mobilecompetition.htm http://www.chetansharma.com 8 © Copyright 2012, All Rights Reserved. Copying w/o permission is strictly prohibited. 2/2012
  9. 9. Operators from China/India dominatethe global subscription rankings Operators by Subs1 China Mobile2 China Unicom3 Bharti Airtel4 Reliance5 Vodafone India6 China Telecom7 Verizon Wireless8 Operators by Subs9 Idea10 AT&T Wireless http://www.chetansharma.com 9 © Copyright 2012, All Rights Reserved. Copying w/o permission is strictly prohibited. 2/2012
  10. 10. ARPU: China – Steady, India - Nosedive http://www.chetansharma.com 10 © Copyright 2012, All Rights Reserved. Copying w/o permission is strictly prohibited. 2/2012
  11. 11. China leads India on many fronts http://www.chetansharma.com 11 © Copyright 2012, All Rights Reserved. Copying w/o permission is strictly prohibited. 2/2012
  12. 12. Save The Date Sept 10th, 2012 Seattle Connected Universe. Monetizing Opportunities. www.mobilefutureforward.com Contact info@mobilefutureforward.com for sponsorship and speaking opportunities
  13. 13. Join Us March 28th, 2012 SeattleHow Mobile is Changing Media, Commerce, and Consumers? www.mobilebreakfastseries.com Contact info@mobilebreakfastseries.com for sponsorship and speaking opportunities
  14. 14. ThanksChetan Sharma Mobile Future Forwardchetan@chetansharma.com info@mobilefutureforward.comTW: @chetansharma TW: @mfutureforwardhttp://www.chetansharma.com http://www.mobilefutureforward.com Research. Technology. Strategy. Intellectual Property. Thought Leadership Summits. http://www.chetansharma.com 14 © Copyright 2012, All Rights Reserved. Copying w/o permission is strictly prohibited. 2/2012

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