India and China: December Customer Numbers
The two large Chinese mobile operators both reported their December customer numbers last week, on the same day that the COAI published the same data for the Indian GSM operators. The two sets of data make an interesting comparison. Previously, we have suggested that while the Chinese market has the appearance of a controlled economy, with its near linear growth, the Indian market's expansion looked to be becoming exponential.
As the chart below shows, the latest data no longer supports that view. After five months of increasing growth, India marked time in November and fell back in December.
China Mobile added some 4.8m customers in December, to take its reported total to more than 300m customers for the first time. However, a small proportion of these are in Hong Kong, so it will have to wait another week or two to become the first operator to achieve 300m connections in a single market. China Unicom added 1.26m in the month, rather fewer than the 1.30m it added in November, with both CDMA and GSM networks sharing the reduction. Including the 1.2m customers that are connected to the Unicom network in Guizhou (which is still a wholly-owned state enterprise) the total number of customers in the country now stands at 443.5m, which means that the market is now more than one third penetrated for the first time.
This leaves it far ahead of India, where this ratio only moved into double digits in July 2006, but India is now making the more rapid progress, both relatively and absolutely. China added a total of just under 6.1m customers in December, bringing the total for the quarter to just under 18m; India, by contrast, added 6.25m, to bring the total number of additions to 19.5m this quarter.
The question now is, has India shot its bolt? Was 2006 the peak year, or will the market move ahead again in the first quarter, as it did last year? We need a longer time horizon to answer the question. Looking back over the first years of this century, what we see is a convincing upwards trend, but one which is far from smooth, month on month. After the twin peaks in mid 2003 (when more than 2m net connections were made in both May and July) it was another two years before the 2m mark was exceeded once more.
A similar pattern could be seen in many European markets during the 90s; after several years of slow growth, the pace of penetration would accelerate rapidly, before pausing for breath, as it were, around the 12-15% mark. The next move in those markets was almost always a rapidly doubling to 25-30% after which there would be a second pause before the next phase began. This, we would suggest, is what is happening here. The hiatus in European markets was typically associated with network congestion or cost of growth considerations, both of which are likely to be features here too, especially if there is to be structural change within the industry.
The Indian market is far more competitive than the Chinese, with at least three and more generally, four operators in each of the regional markets. None of the current 14 operators has as much as 25% market share overall. However, four large players - Bharti (22.4%), Reliance (21.0%), BSNL (16.8%) and Hutchison (16.4%) - account for the vast majority of all connections and currently have over 109m customers out of the national total of 142.5m.
A sale by Hutchison of its interests in the country could produce a dominant or at least, semi-dominant player for the first time. If the near-67% stake were to pass to Reliance, as has been suggested, the combined entity would have well over 50m customers. That would challenge the status quo and no doubt, other operators would have to look for a suitable response. At a time of mergers, companies look to increase their valuation relative to that of their peers and one way that is achieved is by reining in growth in the short term to enhance profitability.
This article was extracted from The Mobile World Briefing, the weekly newsletter from The Mobile World. To download a sample issue of the Briefing in PDF format, please click here. For more information including full subscription pricing, please visit The Mobile World"
Posted to the site on 30th January 2007