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Technology Stocks : Qualcomm Moderated Thread - please read rules before posting
QCOM 176.67+1.6%3:59 PM EST
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To: grinder965 who wrote (11677)6/18/2001 2:08:48 PM
From: Eric L   of 196625
 
re: China Prepaid

Small now but ... let the accounting problems begin. <g>

Analysts predict that 90% of new users will be prepaid.

>> High Prepaid Growth Expected In China During 2001

James Moore
EMC Cellular
18-Jun-2001

China has seen rapid growth in prepaid. This has meant that China's overall cellular market is growing at an extremely high rate. China Mobile had 14 million prepaid subscribers at the end of December 2000. On 20 March 2001 China Unicom had 2.9 million prepaid subscribers.

Operator      End-Mar 2000 End-Jun 2000 End-Sep 2000 
China Mobile  967,000      3,667,000    10,580,000 
China Unicom  162,000        578,000     1,430,000


Background

Prepaid in China has been around for less than two years. China Mobile started its prepaid service on 18 August 1999 in 12 major cities including Beijing, Guangzhou, Shanghai and Tianjin as well as in some provincial capitals. On 25 January 2000 China Mobile started the service in 150 cities in another 13 provinces. A further 18 provinces followed on 22 June 2000. This meant all 31 provinces had a prepaid service by June 2000.

China Unicom started a prepaid service at the end of 1999 first in Beijing, Shanghai, Guangzhou and Shenzhen. It was not until the second half of the year 2000 that all provinces had a prepaid service.

Prepaid vs Postpaid

Prepaid growth has been extremely rapid in the last 12 months mainly because it was only by June 2000 that all the provinces had a prepaid service. There has been churn from postpaid to prepaid as exemplified by Jiangsu province which is a relatively wealthy region and saw the introduction of prepaid by China Mobile in late 1999. Analysts predict that 90% of new users will be prepaid. The increase in the prepaid base will lower operators' subscriber ARPUs but revenues should be compensated by the dramatic subscriber growth. China Mobile's financial results for fiscal year 2000 showed prepaid ARPU lower than analyst expectations at CNY 87 a month. Overall ARPU was CNY 221 which was down from CNY 299 in 1999.

Prepaid users can also be more quickly added to the network and are cheaper to enrol. Some handset dealers charge the operator a commission of CNY 250 for each postpaid subscriber sign whereas for a prepaid users they only charge CNY 50.

The success of prepaid is driven by its appeal to more cost conscious users and especially middle income subscribers. Handset prices are becoming cheaper with domestic manufacturing and increasing economies of scale which the high subscriber growth has helped fuel. The lower terminal prices and service packages, increased competition and high prepaid growth under the backdrop of increasing prosperity and favourable government policies means that there continues to be great potential for growth in the Chinese cellular industry.

USD 1 = CNY (Chinese Yuan Renminbi) 8.28 <<

- Eric -
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