Status of Telecom Market in the First Half of 2008
MIIT's data shows that in the first half of 2008, the national telecom service completed a total amount of 1,095.21 billion Yuan, up 25.9% year-on- year; telecom business income was 398.79 billion Yuan, up 9.2% year-on-year. The gap between total revenue of telecom service and income is further enlarging. Falling prices in telecom services fully reflects the intense competition in China's telecom market. Generally speaking, there are two major characteristics of China's telecom market in the first half of 2008:
Huge differences between telecom services' development
Mobile communications' rapid development is still the major impetus of China's telecom steady growth in the first half year of 2008, with an income going up 15.9% year-on-year and a market share of 53.6%. Data communications service has the rapidest growth rate, in particular, broadband access has a growth rate of 40.4% and a share of 9.4%. The shares of fixed network local call connection and long distance call continue to decrease.
By the end of June, 2008, China Mobile's users has increased by 45.25 million, with the total number of users' number reaching 414.6 million; China Unicom's has 7.035 million new users, with total number of users reaching 127.6 million. The number of users between the two major providers continues to enlarge. The income of China Mobile has exceeded 93 billion Yuan in 2008Q1, up 19.7% year-on-year; China Unicom's income in 2008Q1 is 25.95 billion Yuan, up 6% year-on-year. The distance between these two carriers further enlarges, widening their profit distance.
Changes in the Telecom Market
China's mobile communications market's rapid development is in favor of China Mobile. After the telecom reorganization, only three carriers have mobile operation license, but currently the most important subject of New Telecom and New Unicom is still resource integration, which limit their capabilities to challenge China Mobile in public mobile communications market in short-term. However, telecom reorganization's final purpose is supporting and forming three market competition corpuses, all with nationwide network resources, similar strengths and scales, full-services management ability and strong competitiveness. Affected by internal and external factors, China's telecom market will experience more changes in next one or two years.
Regulation Policy
The monopoly in the telecom industry is highly sensitive to industrial policies. In the next one or two years, regulation policies might make a turn to ensure the market is competitive - asymmetry regulation policy that aims at China Mobile might appear, just as the tariff imposed by supervision departments in the past. With past experience proofing direct tariff regulation ineffective and might result in disordered competition, similar policies are likely to affect telecom industrial profit level and may bring about unfavorable influence on telecom infrastructure.
With South Korean telecom market's experience, a possible asymmetric regulation policy may be unidirectional wireless number portability. This asymmetric regulation policy means users could freely transfer from one carrier to another carrier, but if another carrier's users would like to transfer to this carrier, they will be restricted. After carrying through asymmetric regulation policy, telecom tariff level will decrease; and in order to retain users, the level of service will improve. There are three influencing factors of asymmetric regulation policy: the first is popularity of mobile communications: wireless number portability's implementation's coverage rate is about 60%. In view of China's huge user population, this proportion could slightly decrease. The second is technology limitation, wireless number portability has higher requirements to unified operation support system; however, China's telecom infrastructure is still regionally unbalance. The third is domestic 3G. China Mobile undertakes network setup of TD-SCDMA, which will be the important considering factor of asymmetric regulation policy.
3G Progress
China Mobile, China Telecom and China Unicom will obtain their 3G licenses at the end of 2008. With 3G's continuous development worldwide, 3G service is increasingly mature. Especially in future mobile communications with Internet service as the core, compared with 2G network, the advantage of 3G and B3G network will be increasingly obvious. In future China's 3G developments, China Unicom has the most mature WCDMA license; China mobile's TD-SCDMA standard is supported by the nation; China Telecom's CDMA2000 has gone ahead, which could rapidly aim at high-end users. Three carriers have their own advantages. In the process of 3G, technology and standard become carrier development's important variable.
Industrial Market's Development
Carriers have confronted the crisis of ARPU fluctuation, so the industrial sector is now considered as a new growth point. Currently, China's industrial telecom application development is at primary stage. Public user's standardization service in the industrial market is still rough to satisfy users' customized and personalized demands, and the services carriers provide cannot integrate industrial users' business process. As for developed industrial users, these three carriers are nearly in the same horizontal line. Compared with China Unicom (China Netcom), China Telecom has slight advantage, with increasing industrial users, while China Netcom's industrial clients' number has a downslide in 2008Q1; compared with China Mobile, acquiring precious mobile operation license will be beneficial to China Telecom's deep development to industrial users.
