BEIJING, China-Amid slowing subscriber growth worldwide, China still shows a healthy increase in mobile-phone users. The country’s two mobile-phone operators are each offering new services-one General Packet Radio Service (GPRS), the other CDMA. Handset manufacturing is also soaring, with domestic suppliers narrowing the still considerable gap with foreign manufacturers.
The number of China’s mobile-phone users hit 117 million in June, up from 85.26 million at the end of last year. China’s Ministry of Information Industry (MII) predicts that the country will add an additional 15 million by the end of the year, but this forecast will most probably prove to be too conservative. A one-time connection fee of CNY500 (US$60) was scrapped in July, giving prospective customers a new incentive to finally take the plunge and purchase a handset, the price of which is constantly dropping.
The Middle Kingdom is well on its way to surpassing the United States as the country with the largest number of mobile-phone subscribers. China is adding mobile subscribers at a faster rate than fixed-line subscribers. According to MII’s conservative estimate, there will be 132 million mobile-phone subscribers compared with 169 million fixed-line users.
GPRS versus CDMA
China’s two mobile-phone operators, China Mobile and China Unicom, are pitted against each other in a feverish battle for the hearts and minds of the Chinese consumers. China Mobile is still the dominant operator with a market share of 75 percent, but it is quickly losing ground. In anticipation of the rollout of third-generation (3G) services, the company is betting on GPRS to hold the leading edge. On 9 July, China Mobile commenced experimental commercial GPRS services in 25 cities in 16 provinces with a total capacity of 400,000 subscribers.
China Unicom is betting on CDMA to further narrow the distance with China Mobile. Installation activities started in July, with experimental connections already available in Shanghai, Dalian and Hainan provinces. Network equipment keeps arriving in China and a contract for a billing system has been signed. In mid-August, China Unicom signed contracts with 10 handset suppliers. The company has already sent two teams of specialists to be trained abroad to guarantee smooth network operations.
China Unicom’s CDMA network launch is planned for October and will have an installed capacity of 15.5 million subscribers. The company is also China’s major paging service provider with 43.92 million subscribers and is struggling to get a foothold in the fixed-line market with a market share of a mere 1 percent.
With a sales volume of CNY125 billion (US$15.12 billion) China Mobile rose from the 11th to the fifth spot in the year 2000 ranking of China’s state-owned companies by the Economic Information Center of the State Economic and Trade Commission. Competitor China Unicom noted sales of CNY27 billion (US$3.27 billion) in 2000 and ended 16th, up from the 78th place in 1999.
Mobile data is also taking off in China as short message services (SMS), news, weather and stock briefs are gaining popularity. China Mobile expects its income from the Monternet mobile data communications service to top CNY 1 billion (US$121 million) this year. China Unicom launched its Uni-Info service on 1 August.
Manufacturing star
In the first half of the year China manufactured 36.79 million handsets, an increase of 102.4 percent over the corresponding period last year. Exported handsets numbered 14.8 million.
There are 28 companies producing mobile phones in China; 11 produce domestic brands including Amoisonic, Bird, Capitel, CEC, Eastcom, Haier, Kejian, Konka, Soutec, TCL and Xoceco. The other 17 companies are original equipment manufacturers (OEMs) of foreign suppliers including Nokia, Motorola, Ericsson and Siemens.
The local companies are still the underdogs. They teamed up in the domestic mobile-phone makers’ forum in June, but its chairman Shi Jixing, who is also president of local manufacturer Eastcom, expects the 11 brands to shrink by half through mergers and acquisitions. Qu Weizhi, vice minister of the information industry, predicts that several manufacturers will go bankrupt before the end of the year. On the other hand, the ministry has decided not to issue any more licenses for OEM manufacturing as competition in the domestic market is heating up.
Domestic brand manufacturers want to snatch a 50-percent domestic market share in the coming three years, up from 8 percent in the first half of 2001.
FCC model
Wu Jichuan, minister of the MII, recently declared to the Chinese media that broadcasting and telecom operators should be allowed to enter each other’s businesses to spur competition. Up to now there is a Chinese wall between the two sectors. Some reports even hinted that the MII and the State Administration of Film, Radio and Television (SARFT), which regulates and oversees the broadcasting and cable TV sectors, would be merged into one department modeled on the U.S. Federal Communications Commission (FCC).
The SARFT wants to keep a tight grip on movies and TV programs, but telecom analyst Yang Peifang of the Chinese Academy of Telecommunications Research (CATC) argues that SARFT’s communications network should have been transferred to the management of MII a long time ago.
Officials from both ministries dismissed the rumors of the two administrations merging, but the fact that they were floated at all proves that some people in the bureaucracy are brainstorming about a radical regulatory overhaul of the sector, which no doubt will also have an impact on mobile communications.
