INTEROP Russia: BRIC Wireless Markets June 29, 2006Posted by Chetan in : BRIC,Carriers,International Trade,Speaking Engagements,Strategy,Uncategorized,US Wireless Market , add a comment
6 cities, 5 time zones, 4 countries, 10 days. Last week was quite hectic but it was great. From the exquisite towering cathedrals in St. Petersburg and Kremlin to serene Stockholm, from a midnight stroll in daylight by river Neva in St. Petersburg to 4am walk in Gamla Stan (Stockholm), from reading the subway maps in Russian to catching a soccer match in Amsterdam, the trip was quite memorable. In Moscow, I was speaking at the INTEROP conference on the topic of “BRIC wireless markets – lessons, opportunities and challenges.”
This note highlights some of the points discussed during the talk.
BRIC which stands for Brazil, Russia, India, and China collectively represent the biggest and fastest growing wireless subscriber block. While the sheer volumes represent enormous opportunities for the near and distant future, there are significant challenges and risks associated with these markets as well. Unprepared and naïve companies have been chewed and spat out in no time.
First, let’s do the numbers:
• Over 682M subs by 2005
• BRIC markets will account for over 50% net adds 2005-9
– Net adds – 159M in 2005
• Subscribers – Brazil (87M), Russia (125M), India (75M), and China (393M)
• Penetration – Brazil (46%), Russia (86%), India (6.3%), and China (30%)
• ARPU is low – Brazil ($13), Russia ($7), India ($10), China ($10)
• Data ARPU is low – $0.8-$1.5
Of course, since Dec 2005, the growth has continued unabated. China surpassed the 400M mark while India crossed the 100M mark and both countries show signs of continued growth. India is on the verge of another surge due to rural network expansion in 2006. However, both countries have some tough 3G spectrum decisions to take care of (have been delayed several times), particularly in China where the government is favoring the controversial TD-SCDMA and carriers opting for standards such as WCDMA. With Olympics looming in Beijing, this makes for an interesting dynamics.
BRIC markets share some characteristics but are also unique in how they have progressed and in how they should be approached. The primary growth drivers with some degree of variability have been:
• Prepaid dominates
• Pent-up Rural demand
• Market reforms driving the industry
• Competitive pressures on big carriers
• Low-priced handsets
• Some of the lowest infrastructure costs
• Lowest tariffs
• Carriers profitable despite low ARPUs
As highlighted in our report “Indian Wireless Market” back in May, India and China are adding on an average over 5M subs per month. That is in contrast to 5M net sub adds per quarter in the US and less than a million net adds per quarter in Japan and Korea. With the penetration rate at 12% and 30% respectively for India and China, these nations will continue to add approx 60M subs per year for the next 3-5 years.
Despite the growing subscriber numbers, pressure on ARPU remains strong and the ARPU has been on the decline in all BRIC countries. Data ARPU for BRIC countries is also small compared to some of the other established markets and is bound to stay that way for the foreseeable future. We will cover worldwide ARPU trends in a forthcoming paper. Stay tuned.
Summary of Lessons and observations
• Government participation essential – Unified telecom Policy
• Highly price sensitive markets
• Data applications used as a churn-prevention tool
• Role of competitive forces an foreign investment is quite important – lowers costs to consumers which stimulates growth
• Low or zero import subsidies on parts or finished goods
• Operators control the value chain
• Operators can lower cost of infrastructure by accepting lower busy-call completion rates
• Revenue-sharing arrangement with vendors vs. pure licensing deals
• Low price demands innovation, participation in local economy
• Network-sharing for rural expansion
• Role for lower frequency bands (450MHz) is important
• Localize data applications
• E.g. India – Cricket, Bollywood, Education, etc.
• Significant IP issues especially in China
• Rural markets key to future growth
• Consumer driven markets, Poor Enterprise markets
• Minimal market for foreign application developers
• Should partner, acquire, or build-up local expertise
• WiMax is attractive but cost considerations are more important
• BRIC markets important for infrastructure players, not that much for application developers
• 3G is in planning stages, spectrum issues need to be resolved quickly
• Considerations for other growing markets like Indonesia and US
Overall, BRIC markets represent significant opportunities but they are not for the faint-hearted. Amidst all the talk of BRIC wireless markets, it is easy to forget that US still remains and will remain the highest revenue generating market in the world for some time with close to $44B in carrier revenues in 2005, almost twice to the second player — Japan and twice of the revenues generated by the carriers in BRIC countries, combined. However, US market presents its own set of challenges and idiosyncrasies. Wireless is doing wonders in BRIC markets and there are tremendous opportunities.
There were also a couple of interesting INTEROP keynotes from Steve Wozniak and Kevin Mitnick.
Overall, it was an action packed conference, covering variety of themes including Wireless, VoIP, and Security. The trip left me longing to return to the region at the next available opportunity.
Your comments are always welcome.
IP Issues in China June 28, 2006Posted by Chetan in : BRIC,Uncategorized , add a comment
This is an incredibly important issue for China. The way it reacts and tackles the IP cases esp. the prominent will define the next 10 or more years. http://www.wirelessweek.com/article/CA6347969.html talks about Nokia’s lawsuit against Chinese manufacturers. Similar issues plague other manuf and infra players. In software, things are even worse. The way Chinese courts handle these cases – both in terms of timely decisions as well as the decisions will be critical and important to watch
Greetings from Russia June 22, 2006Posted by Chetan in : AORTA,BRIC,Uncategorized , add a comment
It has been a fascinating week in Russia. First in St. Petersburg and then in Moscow. One thing that jumps out right away is he way Samsung (and to some extent LG) dominate the advertising billboards, just like they do in other major cities. They are clearly out to make their brand within top 2. More on my talk on BRIC wireless markets at Interop next week.
Billg resigns June 16, 2006Posted by Chetan in : Uncategorized , add a comment
Major story. Seattle Times has a good recap http://seattletimes.nwsource.com/html/businesstechnology/2003064566_webtimeline16.html .. It will be great for the world at large – what governments aren't able to do, Bill will be able to do. Best wishes to him.
Enterprise Mobility Cover Story June 12, 2006Posted by Chetan in : 3G,4G,AORTA,Carriers,Enterprise Mobility,Infrastructure,Middleware,Strategy,Uncategorized,Usability , add a comment
Our cover story on Enterprise Mobility in Wireless World Magazine June 2006
30 countries with over 100% subscriber penetration June 9, 2006Posted by Chetan in : Uncategorized , add a comment
Thanks to multiple SIM subscription, many countries are reporting over 100% penetrations. The number is expected to grow to 40 countries by the end of 06. More details here http://www.telecommagazine.com/newsglobe/article.asp?HH_ID=AR_21483G,AORTA,US Wireless Market , add a comment
3G is on track to start explosive growth next year – http://www.strategyanalytics.net/default.aspx?mod=PressReleaseViewer&a0=2949 .. we discussed this in detail in our "3G – Hitting the mass market" paper that is available at www.chetansharma.com.BRIC,Uncategorized , add a comment
Leaving for Moscow next week to speak at Interop Moscow on the topic of BRIC wireless market.
In the past few months, wireless subscriber growth has been most explosive in BRIC – Brazil, Russia, India, and China. Most of the future growth will also come from these four countries. With China, India, and Russia adding almost 5 million subscribers a month, there are tremendous opportunities. But the markets are also fraught with risks. As such, one has to take a look at the what works and what doesn't. We will take a look at the lessons learned from the market growth in these countries and discuss the opportunities and challenges.
more on the conference later in the month ..India,Uncategorized , add a comment
First reported in our report last month, India wireless industry crosses 100M subscriber mark and gunning for the Russian market figures now.