Hi Maurice, besides agreeing with the attached article, I add that the switch to CDMA may not be as fast as some media make it out to be, because folks are generally satisfied with what they got, need the money for a slew of other goodies (homes, cars, ...), so that cash from CDMA may take more than investors can wait for, resulting in an alternative scenario, namely, CDMA cash to QCOM eventually picks up, but the share price languishing downward just the same.
So, again, do not bet the house, even if it is in New Zealand.
Chugs, Jay
economist.com
QUOTE
Mobile phones in China
A billion voices calling?
Aug 30th 2001 | HONG KONG
From The Economist print edition
High hopes for China’s mobile-phone market have been dashed
AP
Too few farm folk fancy a phone
WHICH is the biggest mobile-phone market in the world? The answer, since July, is China’s. A country in which, until a few years ago, the only people who could afford mobile phones were triad mobsters now has 121m users. BDA, a Beijing consultancy, forecasts that the number will rise to 370m by 2005, enough to persuade many investors—even after telecoms shares have dived all round the world—that China was, and would remain, a magic market.
Over the past few weeks, however, much of that magic has vanished. China Mobile, the mainland’s dominant operator, with 73% of the market, announced half-year results that were superb in every respect bar one: average revenues per user were down by 35%. The drop took analysts by surprise and sent China Mobile’s shares into a tailspin. Shares in China Unicom, the smaller rival in the country’s duopoly, followed. Suddenly, soaring forecasts of market size seemed worth rather less.
Looked at one way, China’s market for mobile telephony appears as promising as ever. Fewer than one in ten of the 1.25 billion Chinese has a mobile phone, compared with four out of ten Americans and five out of ten Europeans. In China, reckons Wang Xiaochu, China Mobile’s chairman, a penetration of three in ten is achievable within a few years. This is more optimistic than the government’s official forecast but still plausible.
But where are the extra two to be found? Most Chinese with any spending power to speak of already have mobiles and use them shamelessly, as anyone who has sat in a cinema in China can attest. To sign up new subscribers, China Mobile and China Unicom are having to reach out to poorer people. One way they are doing this is by offering not the usual service, where users talk and pay the balance of their accounts in arrears, but a prepaid, discounted package. Of China Mobile’s 14m new customers in the first half of this year, 95% took this option. Such subscribers tend to keep talk-time to a minimum. Frivolous communication, including dating, happens increasingly through short text messages, which are cheap.
Although China’s overall market is a long way from saturation, the lucrative segment of it may not be far off. This is not a total disaster, says Ted Dean, managing director of BDA, since low-yield subscribers also cost less—operators do not need to send prepaid customers any bills, for instance. But it does mean that China’s future subscribers will be less profitable than its existing ones. To make matters worse, the regulator has hinted that it intends to give two more licences to mobile operators, perhaps late next year.
The lesson is that China’s markets are rarely as good as they seem. Even in mobile phones, there is still a lot of money to be made—Motorola, an American manufacturer of handsets and the top seller in China, for instance, says that it has fatter profit margins there than anywhere else in the world. But investors tend to be carried away by over-optimistic projections of China’s markets, and pay over the top to enter them.
China’s coastal urban middle classes have been bingeing on everything from life insurance to cars and computers. It is the rural population, however, that makes the Chinese numbers so big, and selling to them is another matter. As foreigners queue up to do business ahead of China’s accession to the World Trade Organisation, that is worth bearing in mind.
UNQUOTE |
