First signs of a mobile slowdown?

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Indian mobile market has been on a tear for nearly two years, but now comes word that Indian appetite for cellular phones might be waning a little. Morgan Stanley analysis shows that there might be a slow down in the making.

Wireless net adds for June came in at 1.37 million – 20% lower than the average monthly net adds in previous 12 months. Monthly subs growth slipped to 3.8% (from an average 7.3% for the previous 12 months), with most of the slowdown occurring in the CDMA segment.

indiasubsjune2004Morgan Stanley points out that for India to achieve its year-end wireless subscriber forecast of 62.7 million, the required monthly rate of new subscriptions should be around 2.6 million subs. However if the demand stays at the current run rate, India will have 50 million subscribers by March 2005. One reason for slowdown is that most operators are finally going after the customer who spends more than the typical $7 a month. The slowdown is one of the reasons why Indian government decided to give telecom sector a big wet kiss in its most recent budget, despite being quite “socialist” in everything else.

Capacity constraints continue to hamper growth for BSNL and Tata, both CDMA players who are in my opinion wilting under pressure from Reliance, which has adopted a “scorched earth” philosophy and is apparently using its mammoth operation to hide the losses it might incure. I don’t have proof but, what’s not good for goose, can’t be great for gander. One company that has bucked the trend is Bharti Telecom.”With 7.67 million subs, Bharti continues to dominate the GSM segment, with a 26.3% share of the 29.2 million GSM subs, and 20.4% of the overall wireless subs in the country,” says Morgan Stanley in a recent report on the company. This spectacular performance and the new telecom budget is one of the reason why Singapore Telecom is planning to increase it stake in the company, according to Associated Press/The Hindustan Times. SingTel owns 28.46% equity in Bharti.

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Charlie Sierra

I thought the slow down was intentional because the carriers were driving demand faster than they could expand the networks. So they’ve back off to collect themselves.

But here is a question I’ve yet to see answered, How is it that HS mfgs are able to sell devices into markets (ie. BRIC – Brazil, Russia, India, China) that have very low per cap GDP and make any money without being subsidized by profits from 1st world nations?

This strikes me as another manifestation of the ‘drug’ pill costs debate. American carriers should be demanding the ‘China Price’ on handsets, and then past the savings on to the consumer.

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