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Home > Communications > Telecommunications > General Telecom
China Telecommunications Report Q4 2008
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China’s mobile market did not expand as rapidly as might be expected during the first half of 2008. Therewere a total of 585.38mn subscribers as of June 2008 with 6mn net additions per month, compared to justover 7mn net additions per month during 2007. With mobile penetration rates at close to 44%, the marketstill offers plenty of opportunities for growth. The majority of new subscribers are from rural and remoteareas due to mobile operators expanding their networks. However, with the existing economic downturndriven by rising energy costs, an appreciation of the Chinese yuan and weak purchasing power, it is notsurprising that low-income households in these areas were the first to cut back on spending. This hasimpacted overall growth in the market.
The government has shown encouraging signs towards greater liberalisation of the market, first throughrestructuring, and now by considering the implementation of mobile number portability (MNP). This isexpected to allow subscribers to retain their existing phone numbers while switching service providers.While this policy is generally welcomed in the market, China Mobile, which has an over 70% marketshare, may feel hindered by the policy. Press announcements have suggested that subscribers could bedeterred from signing up to China Mobile, as they will not be allowed to port their numbers to theoperator. Greater competition and pressure on mobile operators could lead to cheaper tariffs, which wouldmean a significantly larger proportion of the rural population would be able to afford these services.The impact of rural-led subscriber growth has been negative for average revenue per user (ARPU),leading operators to focus on delivering strong value-added service (VAS) revenues in an effort to offsetthis loss. Growth of VAS as a percentage of total operating revenues has been encouraging, with ChinaMobile reporting in the six months ended June 2008 that VAS accounted for 27% of total revenues,following a 26.4% y-o-y increase to CNY52.996bn. As for China Unicom, VAS accounted for 23% ofthe total, having risen by 22.9% y-o-y to CNY8.081bn. Although growth of their respective VASrevenues has been encouraging, both operators will be looking towards their 3G networks to facilitatefuture spending.
However, for China Mobile the take-up of its 3G TD-SCDMA services has been poor, with a report byCCID Consulting stating that as of June 2008 there were just 50,000 users. The number of commercialtrial users had reached 8,000 after just four months of trial. The operator has faced several difficulties notleast of all relating to network and other technical issues. In addition, the variety of handset models hasbeen limited to six, and also suffers from poor performance. This will not have endeared customersinterested in 3G to subscribe to China Mobile’s service. China Unicom has announced it is in the processof trialling W-CDMA, the European 3G equivalent.
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