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Home > Communications > Telecommunications > General Telecom
Industry Strategic Outlook: China Telecommunications Industry Outlook: Competition, TD-SCDMA Rollout And Policy Changes Are Clouding China’s Telecommunications Operators Space
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EXECUTIVE SUMMARY
Recent regulatory and competitive changes in the Chinese telecommunications industry have led to a great deal of debate among industry analysts about the future of one of the fastest growing and dynamic telecommunications sector in the world. In this report, we analyze the competitive, technology, and regulatory issues currently affecting China’s telecommunications operator space with a view to providing strategic guidance to our clients. Our analysis is based on actual interviews we conducted with regulators, industry analysts, representatives at carriers, and various industry groups.
Key strategic findings of this report are:
Provincial Branches of the three carriers will engage in price competition in 2008-09
We believe that price competition among provincial branches of the three carriers — China Mobile, China Telecom, and China Unicom — is only a matter of time. China Telecom now offers its CDMA customers with handset subsidies, free voice calls between their fixed and mobile phones and the usual free wireless on-net minutes calling. Although there is no sign of an aggressive price war yet in other provinces, given that China Telecom has ample capacity on its fixed line and CDMA networks and the smallest subscriber base, we expect it has the most incentive to compete for market share gains based on a full scale price restructuring.
We continue to expect 3G licensing in early 2009 with China Telecom launching first
We continue to expect the timing of 3G licenses to be awarded by the government in early 2009. However, we also note that there have been frequent indefinite delays in 3G licensing (and we have been wrong in the past about the exact timing). In our view, both China Telecom and China Unicom should benefit from obtaining CDMA2000 and WCDMA licenses, but we are of the view that the biggest beneficiary will be China Unicom.
TD-SCDMA: we continue to see neutral impact for China Mobile
Investors and suppliers should disabuse themselves of notions that TD-SCDMA will be the albatross that will have an impact on China Mobile’s operation. China Mobile’s management, brand, network, subscriber base, and business models are second-to-none in the world and the other operators in China’s telco space have a VERY long way to go to compete with China Mobile. Moreover, its long-term expansion strategy is based not just on urban consumers but will happen in rural areas of China that are not going to be affected by 3G for some time.
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