Still
think China's mobile telecoms market offers boundless opportunities?
Fitch Ratings brings investors down to earth in a report that warns of growing risk in the Asian telecoms industry.
Fitch says that while mobile has underpinned growth throughout the region in recent years, operators are seeing profit margins fall because of "aggressive price-based competition" and increased subsidies.
It picks out the chronic delay in issuing China's 3G licences as a particular risk factor -- see this EngagingChina story for more on the 3G saga. Jonathan Cornish, head of Fitch's Asia-Pacific Telecoms, Media & Technology team, says:
There is still ongoing uncertainty in emerging markets, though none more than in China where the government is yet to announce what changes and sector restructuring it may implement, including the number and type of 3G licences."
Of course, China bulls will argue that, unlike Asia's more developed economies, China still has tremendous growth potential. Indeed it has, if we are talking about subscriber growth.
But once the low-hanging fruit have all been picked, China's mobile operators will face the same issues facing those in more developed markets: deteriorating quality of the subscriber base, growing churn, rising handset subsides, the cost of migrating to 3G, stubbornly small non-voice ARPU, etc.
Nevertheless, Fitch picks out China Mobile, the world's largest wireless carrier, as one of the Asian operators that has materially strengthened its underlying credit profile in the past 12-18 months.
