Sunday, March 23, 2008

UTs potential IPTV growth in China - Historical PAS growth

Before I finish posting the recap on the meeting, I wanted to discuss the potential of IPTV adoption. After all, are we just hoping that UTStarcom breaks even? NO. We have all been patiently waiting for IPTV to break out and UT to reap the benefits. As you know, I am tracking the iptv customers that UT has in China and worldwide (see front of blog to the left side). There are many many iptv and broadband estimates on subscribers in the coming years worldwide and in China. There are only 2 or 3 analysts that really follow UT now and everyone is focusing on profitability (I don't blame them). No one seems interested in estimating the earnings potential if indeed iptv breaks out in UT dominated markets (nice sounding, huh :-).

What kind of growth rates can we really expect? Lets look back at PAS. Here are the most recent subscriber numbers from the PHS MOU group.

Scroll down to the combined worldwide numbers because it shows that PAS didn't take off right away either. From 1996 to 2001, the number of subscribers stayed relatively flat at around 5-6 million. It then doubled to over 10 million by December 2001 and then reached 90 million in 4 years (9 times). From a base of 5m to 90m in 4 years, that is a compound annual growth rate (CAGR) of over 100%! Five million is 10x the current iptv subscribers that UT has in China right now. From a base of 10m, that is still a CAGR of over 70% for 4 years. Most of that growth was in China. While UT has had tremendous mis-steps, they do know about disruptive technologies and has the ability to implement wide-scale deployments as we've seen in PAS. Based on broadband numbers and other iptv penetration rates in other countries, and the fact that the iptv era in China has started, it is now a waiting game before the major breakout. The fact that they can reach profitability by Q4 2008 and in 2009, that is a very good sign that they will be in position to reap the benefits when iptv does breakout. I expect the long term market share may be less than what they have in PAS and reaching 70-90m iptv users in China will take longer than PAS. However, they don't have the threat of 3G and PAS obsoletion as well. They also know that unlike PAS, they can penetrate and dominate other secondary markets (India, Brazil, Taiwan, etc.). Just something to keep in the back of your mind.

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