India Offers a Better Bet on Telecoms INSIDE THE MARKETS

By Judy Hua and Sumeet Chatterjee

Phone companies hoping to increase profits by seeking growth in the Chinese market for mobile data and other services, take note: The largest telecommunications market in the world may be growing quickly, but India is a better bet.

As the market for voice calls matures, telecommunications operators around the world, from Vodafone of Britain to Telefonica of Spain, are offering lucrative services that let users download songs and television programs, for example.

These value-added services have taken off in Japan and South Korea, and the mobile phone operators and companies that provide songs, ringtones and television are looking to China and India, the biggest and fastest-growing markets.

But although both countries present obstacles to foreign investment, India is growing faster and offers an easier business climate for phone companies.

“For telecom operators,” said Liu Bin of the consultancy BDA, “you should go to India because its vibrant Bollywood film scene and demand for music is a big plus in its favor.”

Neeraj Roy, chief executive of the cellphone entertainment provider Hungama Mobile, said: “It’s a media-friendly market, and so is the consumer. Music is the major driver, and it’s principally driven by Bollywood.”

The Indian market is also crowded with more carriers and content providers, offering greater opportunities for joint ventures.

The estimated $10 billion mobile content market in China, which is controlled by the state duopoly of China Mobile and China Unicom, is 10 times the size of India’s and increasing by about a third each year.

But the problem with China is getting a foot in the door.

Beijing closely guards its sensitive telecommunications sector, allowing in just a few foreign investors, like Vodafone and SK Telecom of South Korea.

Foreign operators have been lobbying Beijing for years seeking access to the market. Some still hold out hope for liberalization, if only in select fields.

China allows foreign carriers to offer value-added services, like data storage and call forwarding. But they are not allowed a controlling stake in any joint ventures, and companies must pay $250 million for a basic services license.

“It’s a good opportunity,” said Bill Crampton, president of Boston Training Technologies, which provides business English training content to China Mobile. “But the problem is there are just so many people that want to get into this business. You have to have some special and interesting products.”

India is more open to foreign investment, and the top mobile operator in the country, Bharti Airtel, has already enlisted Vodafone and Singapore Telecom as investors.

Major foreign operators made a beeline for the Indian market after the government opened the sector to overseas investors to bolster infrastructure and competition, which have led to rock- bottom prices.

Data services, which probably accounted for 12 percent of total revenue for Indian mobile operators last year, will rise to 22 percent by 2011, according to the research firm Gartner.

Value-added services contributed about 15 percent to revenue at the cellphone company Reliance Communications in the year that ended last March and are expected to reach 20 percent in the current year through March, industry analysts say.

India’s share of data revenue in the Asia-Pacific region excluding Japan is about 6 percent, but Gartner estimates that will almost double to 11.5 percent by 2011.

“India, with more than 14 mobile operators against the big two of China, gives more reasons for operators to work on differentiating their services,” said Madhusudan Gupta, a Gartner senior research analyst based in Singapore. Gupta said it was essential that service providers focus on data services to sustain profitability, Gupta said.

China, by contrast, is expected to remain a duopoly for the foreseeable future.

About 4 in 10 Chinese have a cellphone, while the corresponding rate in India is 1.9, arguably offering greater growth potential.

“I don’t think the situation in China will change significantly before 2010,” said Liu of BDA. “But India will witness its fastest mobile market growth over the next few years with its favorable investment environment.”

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Sumeet Chatterjee reported from New Delhi.

Originally published by Reuters.

(c) 2008 International Herald Tribune. Provided by ProQuest Information and Learning. All rights Reserved.