BEIJING-China’s mobile communications market made big strides forward during 2000. The number of GSM subscribers leapt to more than 70 million, with a penetration rate of 5.5 percent.
China Unicom debuted on the stock market and reconfirmed its intention to build out a CDMA network. Competition intensified amid rumors that China Telecom would soon be granted a mobile license. One-way billing remained a controversial issue, but prices will have to decrease further to sustain the rapid increase in subscriber numbers. 2001 promises the accession of China to the World Trade Organization (WTO) and the entry of foreign operators.
There seems to be no end to the appetite of the Chinese for mobile phones. Two-way billing is holding back some and limiting call traffic. In China, both the caller and the called party pay part of the call costs. Many shut off their handsets and rely on beepers to be alerted when somebody wants to initiate a communication.
The authorities are studying a transfer to a caller-pays billing system. Rumors last December led to a sharp drop in the stock prices of the country’s two mobile-phone operators, China Mobile and China Unicom. The Minister of Information Industry Wu Jichuan quickly intervened to say such a move would still be one to two years off, but he also said the ministry would investigate if the process could be speeded up. The markets were not amused amid so much confusion.
A change in the billing system would not only affect the operating income of the two mobile-phone operators, but could also mean the demise of the beeper.
An unprecedented fee reduction to be implemented between 1 January and 1 March, 2001, left mobile-phone rates untouched because of the halt on billing system changes. Rates for international calls, domestic long-distance calls, leased lines and Internet dial-up access all decreased by up to 50 percent.
In December 2000, Unicom’s subsidiary in Zhejiang province, which has close to one-tenth of all the company’s mobile subscribers on its books, slashed rates by 12.5 percent in the first rate reduction since Unicom was founded six years ago. A spokeswoman for Zhejiang Unicom expects other subsidiaries to follow suit.
Third party
For now, mobile telephone operations in China are still a duopoly. China Mobile claims to have 66 million subscribers; China Unicom 18 million. This would add up to 84 million, but the Ministry of Information Industry (MII) puts the figure at around 73 million. China Mobile used to have the lion’s share of the market, but China Unicom is catching up by adding subscribers faster than its competitor. More competition may be on the way.
China will soon join the World Trade Organization (WTO), probably in the second quarter of the year. Chinese authorities are anxious to make their operators as attuned to the market as possible in preparation for competition with foreign companies, which will initially be allowed to own a 25-percent stake in China’s mobile-phone operators.
In December, AT&T became the first foreign firm to win approval to offer value-added telecommunications services in Pudong, Shanghai, where it will offer broadband services to businesses in a joint venture with Shanghai Telecom and Shanghai Information Investment.
The MII may soon allow fixed-line operator China Telecom to commence mobile services, creating a formidable new competitor. The company is already trespassing in the mobile arena against the wishes of MII by offering Xiaolingtong, a Chinese-style PHS service available in 60 cities throughout the country with an estimated 1 million subscribers. Although roaming is not available, the service is popular because a local call costs only about one-sixth of the price of a similar call on the GSM service.
China Unicom, which already operates a GSM network in competition with China Mobile, is to increase its commercial firepower by expanding a narrowband
CDMA network officially acquired from China Great Wall Telecom on 1 January. At present, the network has only 550,000 users in five cities, but Unicom has plans to expand capacity this year to 10 million in 160 cities.
On 26 December, another competitor, China Railway Communications, was officially established, but the company does not plan to offer mobile services soon.
Mobile Internet
Wireless Application Protocol (WAP) services have been slow to catch on in China. Of the more than 70 million mobile-phone subscribers, only 10,000 have signed up for WAP service. China Mobile has launched the Monternet project to allow Internet content providers (ICPs) to collect fees from content viewers through China Mobile’s fee collection system. This should lower ICP reliance on advertising income.
The sluggish speed of data connections on the GSM network is no doubt partly to blame for the unpopularity of WAP. The advent of General Packet Radio Service (GPRS) should speed things up.
Motorola will supply wireless chips and design expertise to Eastern Communications (Eastcom) in Hangzhou and the China Integrated Circuit Design Center (CIDC) to develop a 2.5-generation (2.5G) GSM/GPRS handset for the Chinese market. The company is also supplying a high-speed GPRS mobile data network with a capacity of 110,000 subscribers to China Mobile in Beijing, Tianjin, Hangzhou and Chengdu. Ericsson is supplying GPRS network equipment to an additional nine cities. China Mobile is expected to build the world’s largest GPRS network.
2000 was an exciting year in the mobile telecom field in China. With China’s entry into the WTO, increased competition and a possible market breakthrough by local handset manufacturers, 2001 promises to be even more so.
