Home > Research and Market Data > Communications Market Reports > International Communications Market 07 > Overview > Emerging markets

1.5.1 Introduction

With 2.8 billion people (42% of the world’s population) and rapidly rising income levels, Brazil, Russia, India and China (the ‘BRIC’ nations) are becoming global economic powerhouses with fast expanding communications services. However, on a per head basis, service take-up tends to be low and their telecoms and broadcasting markets have developed in different ways from most other countries considered in this report. For these reasons we consider the BRIC countries together as a group in this section, while acknowledging the many differences between them.

Figure 1.27 Key country data, 2006

Source: IDATE / Industry data / CRTC / Ofcom / The World Bank, CIA Factbook
* Gross National Income

The patterns of market development and the decisions of policy makers in these countries have great significance for providers and consumers of communications services across the globe:

• The BRIC nations are driving much of the growth in the global communications sector. As a result many communications companies based in more mature markets are looking to take advantage of expansion opportunities in the BRIC nations and investment capital is pouring in. Conversely the wealth being generated within the BRIC economies is now starting to generate outward investment as key operators and infrastructure vendors seek to compete abroad.
• The sheer number of consumers of telecoms and broadcast services in the BRIC nations combined with their rapidly expanding purchasing power mean that they have an increasing impact on the adoption of technical standards and hardware specifications.
• The relative lack of legacy communications infrastructure in the BRIC nations means that they provide an interesting comparison to the UK and the other mature communications markets, as they are characterised by a limited fixed-line environment and faster development of wireless technologies.

1.5.2 The telecoms industry in BRIC nations

In this section we examine the mobile and fixed markets before looking at the new opportunities offered to operators through broadband and mobile data services.

Massive growth in mobile penetration

Over 660 million mobile subscriptions have been added in the BRIC countries over the five-year period since 2001 (Figure 1.28), accounting for 40% of total new subscriptions worldwide. This compares with 295 million mobile subscriptions added in the 12 countries covered within the main body of this report.

The biggest increase during 2006 came in India; where the extension of network coverage into smaller towns, lower voice tariffs, intense competition between operators and the introduction of subscriptions with lifetime validity (the subscription only expires if the operator’s licence ends or the user does not recharge with a small amount every six months) led to a doubling of the mobile subscription base to 150 million. Growth in China and India was also strong at the start of 2007; ten million subscriptions per month were added between them. By contrast, reported growth in mobile subscriptions slowed in Russia in 2005 and 2006, partly a consequence of operators narrowing the definition of an ‘active’ subscription in order to boost the amount of revenue generated by each subscription (an important metric for investors).

With penetration of mobile services now approaching the 100% mark in many major BRIC cities operators are now looking for growth from smaller towns and rural areas and are extending network coverage and targeting customers with lower incomes to help achieve this.

Figure 1.28 Mobile subscriptions 2001 to 2006

Source: IDATE / Industry data / Ofcom

Revenue per mobile connection hides the real story

As with the UK, mobile now accounts for more than half of all telecoms revenue in India, Russia and China (with revenue increases of 800%, 300% and 100% respectively between 2001 and 2006) and just less than half in Brazil (where the market doubled).

Revenue per connection is lower for mobile than for fixed-line voice or broadband in all of the BRIC countries (Figure 1.29). However, revenue per mobile user is more difficult to determine as pre-pay accounts for 80–95% of the mobile market in all four countries (compared to 66% in the UK) and a characteristic of pre-pay markets is that low switching costs make multiple SIM ownership more likely, as consumers seek to take advantage of different tariffs. For example in Russia, where handsets are sold through retail outlets rather than directly through operators, Euroset estimates that there were 2.3 mobile subscriptions for every user, meaning that mobile user penetration stood at 55% in June 2007, compared to connections per person of over 110%.

Therefore actual revenue per user is higher in all four countries than the revenue per connection, although it is almost certainly still lower than revenue per fixed voice or broadband user. This reflects the fact that mobile penetration is greater than that for fixed line or broadband, with a large number of low-spending users. By contrast, revenue per broadband user is particularly high in Brazil and India due to limited competition and a lack of network investment which limits the addressable market.

Figure 1.29 Average revenue per connection by service type, 2005 and 2006

Source: IDATE / Industry data / Ofcom
Note: Revenue excludes corporate data services and dial-up internet

Fixed line markets flat in Brazil and India

Figure 1.30 highlights the significant change in the relative penetration of fixed and mobile services within the BRIC countries over the five year period. Take-up of fixed line services has remained fairly static in Brazil and India due to high prices and a lack of investment both within and outside the major cities. With mobile being a cheaper and more convenient way of communicating in all four countries, fixed line penetration looks unlikely to achieve levels close to that of the UK.

Figure 1.30 Mobile and fixed line penetration, 2001 and 2006

Source: IDATE / industry data / Ofcom

Mobile operators branching out into data services

The large number of mobile subscribers in China (444 million in 2006) compared to the UK (70 million), means that, despite lower revenue per capita, the amount of revenue generated from mobile services in China is twice that of the UK.

Mobile voice revenue per person accounted for a greater proportion of total spend on telecoms in 2006 in the BRIC nations (over 80%) compared to the UK (78%). The average annual growth rate of mobile voice revenue per capita varied across the four BRIC countries; India was the highest at 49% in 2006 due to a large increase in the number of new mobile users; growth in Russia was strong at 34% while in China growth was lower in 2006 (10%) than in 2005 (12%).

However, although voice remains the core telecoms revenue stream as it does in the UK, many operators in the BRIC nations, such as Vodafone (formally Hutchison) in India, are keen to diversify their activities with basic mobile data services particularly attractive.

China has the most developed mobile data market of any of the BRIC nations, with 20% of mobile revenue generated by data services and over 429 billion text messages and 5.5 billion MMS messages sent in 2006. The majority of this comes from sophisticated mobile users in the more developed cities who are using the most advanced mobile data services available to them.

In contrast to China, SMS messaging in Brazil, India and Russia is still at comparatively low levels. SMS interconnection (where SMS messages can be sent between different operator’s networks), an important factor in stimulating use, was only introduced in Brazil in 2003 and in Russia in 2002, and has probably suppressed take-up in these countries.

Although SMS, ringtones and picture downloads account for the majority of mobile data revenues in all four countries a market for higher speed mobile data is starting to emerge. Some operators in Brazil, Russia and India have already deployed advanced technology to enable higher data speeds pre-3G, such as EDGE over GSM, on their existing 2G networks, which enables higher data speeds and expands voice capacity without the need for a new network.

Licence awards for the deployment of 3G networks are expected later in 2007 in Brazil (using WCDMA) and by early 2008 in India (using WCDMA and CDMA2000 1x EV-DO). Limited rollout of 3G using WCDMA technology took place in Russia during 2007 as operators test the market. However, the Chinese government is not expected to award 3G licences until at least 2008, although operators have been trialling 3G networks extensively across China and once licences are awarded services can be expected to expand swiftly.

Figure 1.31 Mobile data and voice revenue per capita, 2005 and 2006

Source: IDATE / industry data / Ofcom
Notes: Revenue excludes corporate data services and dial-up internet;
2005 data for Brazil is not available

Little growth in the number of fixed lines except in China

There was a small increase in the number of fixed lines in Brazil, Russia and India between 2001 and 2006 (Figure 1.32). However in China the figure grew by 79%, driven by the roll-out of fixed lines outside the main cities as part of a government policy designed to encourage greater economic development.

Figure 1.32 Total fixed exchange lines (PSTN and ISDN)

Source: IDATE / industry data / Ofcom

Low availability limits broadband uptake

The number of broadband connections within the BRIC countries broadly mirrors the number of fixed lines. Perhaps surprisingly, Russian penetration stands at just 2% (Figure 1.33), although expansion of DSL and fibre coverage and competition between subsidiaries of Svyazinvest, the state-owned telecoms holding company, and alternative broadband providers has created strong growth in 2007.

The cost of extending broadband penetration through fixed-line DSL and fibre has limited availability outside the major cities. Less expensive alternatives such as HSDPA and LTE are being considered as viable alternatives, both within cities and in rural areas, although these technologies are less developed than DSL. WiMAX is also being trialled by TVA in Brazil; Bharti, BSNL and Reliance in India; Comstar-UTS; and Golden Telecom in Russia.

Figure 1.33 Broadband connections per 100 households, 2006

Source: IDATE / industry data / Ofcom

The rise and rise of mobile

Telecoms revenue increased substantially in each of the BRIC countries between 2002 - 2006 (Figure 1.34). Growth has come primarily from mobile where rapidly growing disposable income and significant investments in infrastructure have driven a sharp rise in adoption.

By contrast, following four years of slow growth, fixed line revenues declined in 2006 in Brazil, China and India, as pressure on voice pricing and fixed-to-mobile substitution began to have an impact. The recent rapid expansion of fixed-line infrastructure outside of the major urban centres of Russia helped an increase in fixed line revenue of 9% in 2006, although this was down from 12% in 2005.

Figure 1.34 Telecoms revenue by service type, 2004-2006

Source: Source: IDATE / industry data / Ofcom
Note: Revenue excludes corporate data services and dial-up internet

1.5.3 The television industry in BRIC

Russia’s television industry expanding fast thanks to growth in advertising

The BRIC countries started on the path towards television market liberalisation relatively recently. This has had a significant bearing on the rate at which their television revenues have grown (Figure 1.35).

Of the four nations, Russia’s TV industry revenue was the smallest in 2006 (£1.6bn), though it expanded fastest (at 29% annually) since 2001, reflecting the growing attractiveness of the medium to advertisers; by 2006 advertiser revenue accounted for 89% of total industry revenue. Indian revenue also expanded rapidly over the same period, rising at an annual rate of 24% to total £2.9bn in 2006. But the underlying driver was subscriptions, not advertising – reflecting the popularity of, for example, the Star TV service which in turn may have been driven by the younger age profile of the Indian population.

The Chinese and Brazilian television industries have grown more slowly. Nevertheless the Chinese industry doubled in size between 2001 and 2006, and now has annual turnover of £5bn, driven by increases in both advertising and subscription revenue that were in turn prompted by the Chinese government’s progressive commercialisation of its television industry.

Figure 1.35 Television industry turnover
Revenue (£bn)

Source: World Television Markets 2006, IDATE

But Brazil’s market generated the most revenue per capita

The picture on a per capita basis exposes differences in economic prosperity between the BRIC nations (Figure 1.36). Television industries in Russian and Brazil are the best developed of the four, generating £22 and £11 per capita respectively in 2006. The relative economic strength of these countries when set beside India and China is likely to be a significant explanatory factor for their higher per capita revenues. But all four industries remain substantially smaller on a per capita basis than those in North America and Europe; for example, the UK and US industries generated £165 and £236 respectively in 2006.

Figure 1.36 Television industry revenue per capita, 2006
Revenue per capita, 2006 (£)

Source: World Television Markets 2006 (IDATE) and Ofcom analysis

Advertising and subscriptions are key components of revenue mixes in BRIC

In all the BRIC nations, the television industries are almost wholly dependent on commercial sources of revenue. But the mix of commercial revenue varies dramatically (Figure 1.37). Advertising revenue is the principal source of funding in Russia and Brazil. By contrast, pay television is developing in China and is well established in India, with the result that subscriber revenue plays a larger role in both their industries.

Figure 1.37 Per capita sources of industry revenue, 2006
Proportion of funding by source (%)

Source: World Television Markets 2006, IDATE and Ofcom analysis
Note: Figures inside the bars represent industry revenue per capita; the UK has been added for comparative purposes

Digital television has yet to take off in the BRIC countries

Lower per capita revenue among the BRIC countries may also be explained by the absence of the technological advances that have driven the development of television industries in North America, European and Japan – and the additional revenue streams they yield. Digital television is in its infancy and the majority of consumers still rely on analogue services (Figure 1.38). Indian homes have made the greatest progress towards digitisation of television services, but even there fewer than four in a hundred homes have access to it. By way of comparison, among the twelve remaining countries analysed in this report, an average of 35% of homes have their main television set are connected to a digital decoder.

Figure 1.38 Homes connected to digital and analogue platforms in 2006
Proportion of homes (%)

Source: World Television Markets 2006, IDATE
Note: The UK has been added for comparative purposes

Terrestrial television the main means of reception in all but India

Nine in ten Brazilians and eight in ten Russians only have access to the relatively limited range of channels available on analogue terrestrial television (Figure 1.39), with satellite service providers such as Net Servicos/Sky Brazil in Brazil and Kosmos TV in Russia attracting a relatively small number of subscribers. But the cable platform is more popular in China, where 30% of homes have a connection; it is most popular in India where over ten million homes take a connection from companies such as Hathway cable and IN Cablenet, offering customers access to a wide range of regional language channels.

Figure 1.39 Reception devices connected to the main television set
Proportion of homes (%)

Source: World Television Markets 2006, IDATE
Note: The UK has been added for comparative purposes

Over 70% of homes in India and 36% in China take pay-TV

The relatively high availability of analogue cable in India means that nearly three quarters of households receive pay-TV services, while in China the availability of both analogue cable and analogue satellite services account for 36% of television households (Figure 1.40).

By contrast, the dominance of the analogue terrestrial channels in Brazil and Russia is reflected in low take-up of pay-TV services. In Brazil less than 10% of households receive pay-TV (although subscription revenues from these households account for over 30% of total television industry revenue), and in Russia only 16% of houses receive pay-TV.

Figure 1.40 Proportion of homes with free versus pay television
Proportion of homes (%)

Source: World Television Markets 2006, IDATE
Note: The UK has been added for comparative purposes

1.5.4 The radio industry in BRIC

Fast growth in radio markets across BRIC nations

In nations where access to television is not ubiquitous, the role of radio in society can be more akin to that of television in the West. The Chinese radio market is the largest of the BRIC nations at just over £200m in 2006, followed closely by Russia at £190m. For all the BRIC nations the majority of radio revenues come from advertising – like their TV industries, there is little or no public funding, and while subscription radio is available in India, it has yet to reach Brazil, Russia or China.

In parallel with its television industry, Russia’s radio market has grown fastest among the BRIC countries over the last four years, expanding by an average of 32% per annum since 2002 (Figure 1.41). The radio market in India has also more than doubled in this time (again in a parallel with its television industry), up from £23m in 2002 to £57m in 2006, fuelled by rapid growth in radio listening with an increasing number of FM stations.

Per capita, the Russian radio market is most well-developed with £1.33 of revenue generated per head in 2006 compared to £0.61 in Brazil. The equivalent figures for India and China are much lower, partly due to the much larger populations covered, but mostly as a result of lower levels of economic development. In India radio revenues generated equated to just 5p per person; the equivalent figure in China was 15p.

Figure 1.41 Radio revenues across the BRIC nations
Total revenue (£bn)

Source: Ofcom analysis using data taken from PricewaterhouseCoopers Global Entertainment & Media Outlook 2007-2011
Note: An exchange rate of $1.84/£ has been used. Interpretation of data is solely Ofcom’s responsibility.

Indian radio market has highest share of ad spend

Radio advertising’s take of total advertising expenditure varies substantially by country (Figure 1.42). Possibly due to the rising popularity of television advertising in China, radio accounts for just 2% of all advertising expenditure. The Indian radio advertising market is substantially more developed, accounting for 5.3% of all advertising spend. In Brazil and Russia radio commands 2.6% of all advertising revenue - a little lower than in the UK (at 3.4%).

Figure 1.42 Radio industry revenues per capita and as a proportion of ad spend
Industry revenue per capita (£)

Source: Ofcom calculations based on data supplied by WARC, IDATE and PricewaterhouseCoopers Global Entertainment and Media Outlook 2007-2011
Note: An exchange rate of $1.84/£ has been used. The UK has been included for comparative purposes; interpretation of data is solely Ofcom’s responsibility.

Radio reaches over a quarter of the population of India

The availability of listening data for BRIC nations is generally limited but data for India and China suggest that the top radio services can reach a substantial proportion of these large populations.

According to statistics from the National Readership Studies Council (NSRC), radio listening is growing rapidly in India and now enjoys a weekly reach of around 27%, a figure comparable to newspaper readership. FM is popular and has grown by 55% in two years to 119m listeners. The FM services of radio operator AIR reportedly attract a weekly audience of around 70m listeners (or 8.6% of the population), with main station Akashvani attracting around 68 million listeners. AIR’s network covers around a third of the Indian population. Leading private FM stations include: Radio Mirchi with 51.4 million weekly listeners (6.3% reach); Radio City, which registers 44.6 million listeners (5.5%) and Red FM which reaches 22.2 million (2.7%) weekly.

Listening share in China splits three ways - 15% to national stations, 60% to stations in the provinces and 25% to local municipal stations. Leading stations include the national ‘Voice of China’ which had a listening share of 8% in 2005. The other large stations are regional and are based in the larger cities of Beijing, Shanghai, Guangzhou and Tianjin.

Digital radio set for take-off

Digital radio is seen as key to the future development of the sector in all four countries. As Figure 1.43 illustrates, trials and limited commercial launches are taking place in all four countries, although the Brazilian market is most developed with 16 stations broadcasting in DAB by the end of 2006. Perhaps most ambitious of all, India is targeting digital switchover in 2016.

Figure 1.43 Timeline of digital radio developments

Source: Ofcom

1.5.5 Conclusion

This section has highlighted how the BRIC nations have developed into some of the world’s biggest communications markets, generating huge revenues from large, expanding consumer bases. The time taken to achieve key take-up milestones within each country is unprecedented, and the growth rate of communications revenues contrasts sharply with that of slowing revenue growth in mature markets.

Growth in the number of users of communication services within the four countries will continue; driven both by penetration into lower income segments, through the expansion of coverage and the continuation of falling prices, and also rising economic prosperity in smaller towns and rural areas.

At the higher end of the market, revenues and innovation are driven by demand for the latest advanced communications technologies from a large and increasingly affluent population with income levels and consumption patterns comparable with those in developed markets.

Historically the gap in time between communications technologies being rolled out in the mature markets of Asia, Europe and North America and in developing countries has been considerable due to the huge infrastructure investment required in large, diverse countries. Now, not constrained by the legacy infrastructure inherent in mature markets, communication providers in the BRIC nations are deploying advanced technologies in parallel with those in mature markets, or in some cases developing their own advanced technologies, such as the 3G technology TD-SCDMA in China, or contributing to the creation of international standards such as 4G.

Government and regulators within each of the four BRIC countries face their own different sets of challenges in managing the continuing growth of the communications sector. They must balance the desire to extend the reach of basic communications services down into lower income segments, so as to provide the conditions for broader economic development, with the creation and maintenance of a competitive environment that facilitates innovation and investment.

As they address these challenges, there are perhaps lessons to be learnt from countries such as the UK that have long sought to balance the requirement for market-driven growth with universal service obligations. But equally, there are things to learn from the BRIC nations for the UK and other countries with mature communications sectors. These include:

• Industries in the mature communications sectors are competing for investment capital with those in the BRIC economies. In order to attract funds, they may therefore need to innovate even more, if they are to match the growth achievable from simply investing in driving take-up, using established technologies, in the BRIC nations.
• The sheer scale of the BRIC economies means that they are having an increasing impact on technical standards and hardware specifications. Choices over 3G and 3G+ technologies, for example, will have a major impact on global investment handset and network technology.
• In both developed markets and the BRIC nations, rapid growth in the communications sector can contribute to economic growth but can also lead to exclusion among some sections of the population. The BRIC nations have, in some respects, addressed this by by-passing the development of a fixed-line infrastructure and moving straight to more affordable technologies. This offers an interesting example to countries in more mature markets that are looking to wireless as a lower-cost alternative to replacing copper-wire access infrastructure with fibre capable of delivering high-bandwidth services. For example, deployments of WiMax in India, Brazil and Russia are paralleled by investment in WiMax as a mobile broadband technology by Sprint Nextel in the US.

Back to top