Tips from China

India's 3G operators, who will be rolling out 3G networks in the coming

months, can learn from two key markets-China and Japan. The attributes among the

telecom markets of China, Japan and India are almost similar. There is a

dwindling ARPU. But the future is bright with data revenue looking up. China and

India are moving towards rural areas and this is one of the main reasons for

declining ARPU. Japan's DOCOMO is expecting a sharp increase in data revenue,

while most of the Indian service providers expect to double revenue from data

services.

How can India learn from China? China has made inroads into the 3G space

recently, with an overall investment of RMB 160.9 bn in network expansion and

upgrading in 2009. Indian operators should not delay their rollouts. They should

start spending money once they receive spectrum. By the time they get spectrum,

global economies will revive. Indian customers will be in a position to consume

more.

China Mobile's ARPU rose to 77 yuan in the year 2009 as compared with 75 yuan

for January-September. The rise in ARPU was mainly due to growth from VAS, with

revenue jumping 16% from 2008 to contribute about 29% of China Mobile's total

operating revenue. 3G will boost VAS revenue in India. Indian users are just

awaiting the 3G speed.

The number of subscribers in China increased following the introduction of 3G

services. The total 3G users in China touched 13.25 mn in 2009. Increasing

competition and low mobile penetration in rural markets supported the industry.

Reduced tariff charges and falling handset prices added fuel to the growth.

Chinese operators did not wait till the revival of the global economy. They did

not face spectrum crunch. They went on investing in 3G. Usually, operators take

eight to ten months to deploy the network. But there was a remarkable increase

in the number of 3G subscribers in China in 2009. Indian operators need this

kind of aggression.

China Mobile's mobile VAS continues to grow with revenues increasing 16% to

$19 bn. The carrier's online mobile application store, Mobile Market, is a key

contributor. Usage fee revenues grew 9.8% to $42 bn accounting for 63% of the

total revenues. Indian operators can do more in this area. 3G will bring more

speed to the speed hungry population of India.

What is Japan offering to Indian operators? Data communication will surge in

Japan. India's 3G operators offer cost effective packages to its consumers.

Though DOCOMO projects a ¥200 bn drop in revenue from phone calls this fiscal,

it expects a ¥110 bn growth in data communication revenue.

Japan's cell phone operators have been fighting for customers. As people

spend less time and money on phone calls, carriers are struggling to find ways

to enhance data communication revenue, and are pinning their hopes on

smartphones. If entry barriers for smartphones can be removed in India, 3G will

find its own way. Japan's #3 player, Softbank Corp, that sells Apple's iPhone in

Japan, saw its ARPU rising to ¥3,890 in the January-March quarter from ¥3,830 a

year earlier as the iPhone generated strong data communication revenue. Indian

operators have the backing of finance. They are ambitious. Indian operators will

do better than Japan and China as they can learn from the latters' mistakes too.

Baburajan K




baburajank@cybermedia.co.in