K. T. Jagannathan
TRAI study finds contrasting growth in mobile, fixed line services
Usage of cell phones in India is higher vis-à-vis ChinaChinese cos. generate a higher rate of EBITDA margin
CHENNAI: The China-India comparison never ceases to excite, especially for the lessons it holds for assorted people. A just-released study by Telecom Regulatory Authority of India (TRAI) reveals the divergent ways in which the telecom sector is growing in these two highly populated nations.
Interestingly, the study finds a contrasting growth in the mobile and fixed line services in India and China. The growth of mobile subscribers in India has been at a hectic 85 per cent since 1999. China, with a larger base, however, has seen a growth of 16 per cent in mobile subscribers in 2005. Nonetheless, China is adding five million subscribers to its mobile base every month. In India, around four million subscribers join the mobile bandwagon every month.
The `mobile craze' appears to have a telling fall-out on fixed line services in India, which have registered an annual growth of a measly two per cent. China, however, saw fixed line services grow at 12 per cent in 2005. Interestingly enough, the study finds that over 23 per cent of fixed line subscribers in China are connected through wireless in local loop (WLL).
If one compares the telecom revenue in these two countries, China is way ahead of India. The total revenue of Chinese telecom companies increased from $65 billion in 2004-05 to $72.70 billion in 2005-06.
The telecom revenue in India during 2005-06 was $19.50 billion, up from $17 billion in the preceding year. The growth of telecom revenue percentage-wise was higher in India at 14.7 per cent against 11.8 per cent in China.
Interestingly, the study indicates that the ARPU (average revenue per user) in India and China is comparable in the GSM pre-paid segment.
The ARPU for the post-paid segment in China is much higher. ARPU for CDMA services is also higher in China in comparison to India. However, the ARPU for basic telephone services is higher in India when compared to China.
The study reveals that the usage of cell phones in India is higher vis-à-vis China. Minutes of Usage (MOU) of GSM and CDMA-based cellular mobile telephone services in India are 32 per cent and 70 per cent, respectively, higher when compared to the Chinese cellular mobile telephone services.
In spite of higher MOU, the ARPU in India is lower than in China. This is more to do with the fact that the tariffs in India are much lower because of intense competition. In China, the capital employed per subscriber for the basic service is much lower when compared to India. In the cellular segment, however, the capital employed per subscriber in India appears to be less.
Chinese companies are able to generate a higher rate of EBITDA (earnings before interest, tax, depreciation and amortisation) margin and better return on capital than their Indian counterparts. This can be explained by the fact that the Indian mobile market is much more competitive when compared to the Chinese one.
A fascinating aspect of the Chinese telecom story, according to the study, is SMS (short messaging services). In 2005, about 304.65 billion messages were sent, up by 40 per cent over the preceding year. SMS fetched revenue of $3.72 billion in China.