It pays to be a cellco across the Great Wall

Returns for mobile operators 22.87% in China, 7.83% in India.

While India can boast of being the fastest growing mobile market in the world, it is three times more rewarding to be a mobile operator in China.

According to data available with the Telecom Regulatory Authority of India, the return on capital employed (ROCE) for mobile service operators was 22.87 per cent in China during 2004, while it was just 7.83 per cent in India at the end of March 2005.

Chinese mobile operators enjoyed higher profits despite the fact that the average revenue per mobile user (ARPU) and the capital employed per mobile subscriber in both countries were more or less the same.

While the ARPU was $9.69 for China, it was $9.04 for India. Similarly, the capital employed per subscriber was $163 in China and $167 in India.

One reason for the better ROCE for Chinese mobile services companies was the high operating expenditure (OPEX) per subscriber even though the Indian market was far more competitive.

There were only four operators in China "" China Mobile Group, China Unicom Group, China Telecom Group and China Netcom Group "" all of whom were state-owned. Still, India's OPEX per subscriber at $4.18 was almost double than that of China.

"Private operators have to pay higher salaries than the state-owned players. Besides, in the heavily competitive markets, considerable amount of the revenue is reinvested or spent on advertisements and marketing schemes. This leads to higher OPEX and lower profits," explained an executive from a leading Indian mobile operator.

Unlike the scenario here, China's telecom operators were not required to pay high licence fees. This factor had to be considered if RoCE were to be compared, industry experts pointed out.

The other explanation for the lower ROCE of Indian mobile operators was lower tariffs compared to China due to the fierce competition.

"In 2004, Indian mobile customers used their phones for an average of 330 minutes a month compared to 297 minutes for Chinese mobile users. Though mobile users in India talk a lot more than their Chinese counterparts, identical ARPU figures indicate lower tariffs here," said a Trai official.

For basic fixed line services, the ROCE was similar for both the countries. The RoCE for basic services was 10.92 per cent India and 14.79 per cent for China while the Opex per subscriber was to the tune of $5.92 and $4.30 respectively.

However, the capital employed per landline subscriber in India at $ 362 was more than double of that in China.

The stark contrast lies in the subscriber base "" China has 325.40 million landlines and 349.10 million mobile users compared to 45.01 million and 52.21 million respectively in India.