China Telecom, China Unicom face off in yellow pages market
(21 June 2001) Many Beijing residents have been surprised lately at seeing advertisements for the China Yellow Pages on city buses, because a powerful company like China Telecom rarely produces such major ads for a small telephone directory.
But China Telecom, according to one possible explanation, is on the defensive because it has sensed an imminent threat from China Unicom, whose yellow pages have been closing in on the Beijing market from Shenzhen, Guangzhou and Shanghai. Unicom Yellow Page Information Co., registered in Beijing, is planning to issue 100,000 volumes of a "product guide" in July this year, according to a June 19 story by Jingji Guancha Bao (Economic Observer).
Qian Yuanqiang, director of the Beijing-based Unicom Yellow Page Electronic Section, said that Unicom Yellow Page mainly focuses on Shenzhen, Guangzhou, Shanghai, Beijing and other economically developed cities, or what it calls the primary market. The company regards China’s coastal areas as the secondary market.
"Occupying these markets [is] crucial to our success in the future," he said.
Influence of yellow pages starts to grow
For quite a long time, the telephone directory has been a very insignificant part of the telecom business in China, where revenue has mainly come from book sales. In many areas of the country, the publishing of telephone directories even requires subsidies from the core section of the telecom business.
In 1998, yellow pages advertising revenue in the United States, which has a population of 276 million people, reached US$10 billion. In China, which has a population of 1.2 billion people and more than 100 million fixed-line telephone subscribers, yellow pages advertising income was merely 278 million yuan (US$33.57 million) in the same year.
In Singapore, Hong Kong and other countries or regions, yellow pages advertising revenue makes up around 4 percent of total advertising revenue. In China’s fledgling yellow pages market, the advertising income only makes up about 3 percent of total advertising revenue.
"No other countries in the world have a yellow page market with as broad a prospect as China’s," said Dun Huang, vice president of Unicom Yellow Page. "Before the emergence of Unicom Yellow Page, China didn’t have any yellow page at all. Currently, the key issue is to fully explore China’s yellow page industry. It is not necessary for us to compete for the market share with China Telecom’s telephone directories. The time for the face-to-face combat hasn’t come yet."
Dun pointed out that China Telecom’s telephone directories are fundamentally different from traditional yellow pages. Telephone directories merely list telephone numbers, while yellow pages carry business information; telephone directories target all telephone subscribers, while yellow pages focus on small and medium-size enterprises; and telephone directories are for sale, while yellow pages are given out for free.
Given this, some industry analysts say this about China Telecom’s yellow pages and China Unicom’s yellow pages: Instead of being two rats that have simultaneously found one peanut, they are two rats that have found themselves inside a huge grain warehouse. There is so much opportunity in the market that they don't need to compete at all, the Jingji Guancha Bao story said.
Enough for both?
Dun said that in order to avoid unnecessary conflict with China Telecom Yellow Page, Unicom Yellow Page has taken its "Unicom Yellow Page Telephone Directory," released in Shenzhen and Guangzhou, and renamed it "Unicom Yellow Page Industrial and Commercial Consumption Guide."
But even in the face of this move, it is clear that Unicom Yellow Page has already dominated half the market in Shenzhen. In the Guangzhou market, Unicom Yellow Page is also expanding toward 50 percent market share.
In Beijing, Unicom’s China Big Yellow Page, run by Qian, generates more than 1 million yuan (US$120,773) a year. In Shanghai, Unicom’s yellow pages are already locked in fierce competition with Shanghai Telecom’s yellow pages.
However, Unicom Yellow Page still prefers to call such trends "growing up in cooperation." During their two years of coexistence in Shenzhen, both Unicom Yellow Page and China Telecom Yellow Page have experienced significant sales-volume growth. Sales revenue for China Telecom’s yellow pages has reached an unprecedented high, from nearly 7 million yuan (US$845,411) in 1998 to about 14 million yuan (US$1.69 million) in 2000. Its gross market value also soared from 7 million yuan (US$845,411) in 1998 to nearly 40 million yuan (US$4.83 million) in 2000.
Following the emergence of Unicom Yellow Page, Guangzhou’s yellow pages market has been expanding rapidly. China Telecom has not only started giving out yellow pages for free, it is also increasing distribution. While searching for the best operational model for the yellow pages, all yellow pages publishers have been seeing large revenue increases.
An uncertain future
Backed by China Unicom, Unicom (Hong Kong), Pacific Century Cyberworks, R. H. Donnelley, InfoSpace.com and other influential corporations, Unicom Yellow Page seems to be in a strong position. The company, however, does have a problem with telephone number resources and industry access.
Currently, Unicom’s fixed-line telephones only make up a very small proportion of the market in Tianjin, Chongqing and Chengdu. Because of this, the Guangzhou Unicom Yellow Page has been forced to purchase access to some phone numbers from the Ministry of Information Industry (MII) and get others through its salespeople, who have been sent to scout the streets for telephone numbers.
Then there is the problem of industry access. China Telecom, backed by the MII, put out an announcement last year in the "2001 Big Yellow Page" published by Shanghai Telephone Directory Co. stating that the telecom department holds exclusive operational rights over telephone directories; that Shanghai Telephone Directory Co. is an exclusively authorized organization responsible for the compiling and printing of telephone directories and telephone number reference books; and that no other organization is allowed to compile and print such publications.
China’s first "Regulations on Telecommunications," released last year, also failed to mention yellow pages. Although unwritten, the consensus is that both telecommunications departments and non-telecommunications departments can publish yellow pages.
However, Unicom Yellow Page is still apprehensive about its future because of the government’s indifferent attitude. Such uncertainties about policy still hover over them like the sword of Damocles, the Jingji Guancha Bao story said.
But no one doubts the profitability of yellow pages. The Green Page, which was the first to appear on the market and stopped publishing in 1999, published two editions in 1997 and 1998 and gave out more than 10,000 volumes for free. Each edition brought in more than 100,000 yuan (US$12,077) in advertising revenue.
The White Page, which came out almost overnight, already has two editions and brought in 1 million yuan (US$120,773) from advertising last year. The advertising income of Shanghai Telecom’s yellow page has reached 103 million yuan (US$12.44 million).
Unicom Yellow Page, which claims to be the "yellow page in the real sense," has seen a much bigger profit margin. Unicom’s Electronic Version Yellow Page made more than 1 million yuan (US$120,773) in 1999 and several million yuan in 2000.
The print yellow pages have been faring even better. "The Industrial and Commercial Consumption Guide," published in Shenzhen at the end of 1998, issued 350,000 volumes and made nearly US$1 million. During the first year, the guide took 50 percent of the yellow pages advertising market in Shenzhen. According to sources from the marketing department of Unicom Yellow Page (Guangzhou), the company made more than 10 million yuan (US$1.21 million) last year, the story said.
In other countries, the profit margin for yellow pages reaches around 20 percent. In China, a higher profit margin is possible because the operational and management costs are much lower.
"Given the current pace of development, our yellow page will be able to make profit from its domestic business next year if the board of directors doesn't make any major adjustment," Dun said.
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