The China Mobile Market (January 2003)
>> China Mobile Market: Monthly Analysis Report
Broadcom Observation
Translated by Jiang Geji
China MobileComm
January 2003
cicmedia.com
Section I Overview
Upon entering the year 2003, China Mobile has unfolded another campaign. According to the latest statistics published by the Ministry of Information Industry: The Chinese communication industry earned a revenue of RMB456.5 billion Yuan in 2002, thus maintaining a growth speed two to three times the GDP in the past five years. When the global communication industry reached its nadir, it still developed forward rapidly continuously under such a general phenomenon.
In the meantime, competitions in the mobile communication market have also become more and more intense.
- China Mobile begins to promote GPRS and color message.
- China Unicom has pushed CDMA1X to the stage in Guangdong and Shanghai while promoting CDMA energetically.
- Xiaolingtong has been tried the baseline of supervision and control of responsible authorities.
- China Telecom (Guangdong)'s "wanderer returning home" has been ordered to withdraw from the market.
- There are more and more demands on one-way charging and issuance of 3G license becomes more and more likely
All these have indicated that the year 2003 will be a special year in the history of mobile communication of China.
Section II Developments in the Industry
According to the latest statistics of the Ministry of Information Industry, the Chinese communication industry realized an income of RMB456.5 billion in 2002, maintaining a growth speed two to three times the GDP in the past five years. The information industry has increased its ratio in GDP from 2.3% to 5.8%. In addition, number of domestic phone users increased by 95.40 million in 2002, contributing to a total number of 420 million. Network ranks the first in the world with regard to scale and capacity.
Broadcom observation: In 2002, the Chinese communication industry maintained a rapid development, which is worthy of praise indeed when the global communication industry reached its nadir, a general phenomenon in the world. What should be noted is that the business revenue of mobile communication continued to increase its ratio in the total revenue of telecommunications, which rose to 47%. Mobile communication services are becoming a new point of economic growth in the communication industry. Mobile data service represented by short message realized the highest increase, though its revenue now is relatively low. with the gradually spread of 2.5G mobile communication technology, mobile data service characterized by multimedia will step into development stage. Data services have gradually become a key component of mobile communication services, which is a trend of the times.
China Telecom (Guangdong), a subsidiary of China Telecom, said on January 8, 2003, that though it had stopped the spread of its new incoming call retransmit service, namely, "wanderer returning home" mobile phone rest station, it would continue to provide this service.
Broadcom observation: On December 25, 2002, China Telecom (Guangdong) announced to release "wanderer returning home" mobile phone rest station service. China Mobile (Hong Kong) and the parent company of China Unicom complained to the supervision and control authority immediately and asked the authority to investigate relevant supervision and control items, such as mobile phone charges, interconnection, network access charges, etc. Then, China Telecom (Guangdong) Administrative Bureau ordered to stop the service. China Telecom gave a work instruction to the mobile phone rest station service released by China Telecom (Guangdong), demanding it to "postpone the spread of this new service". Compelled by circumstances, China Telecom (Guangdong) has to provide the service secretly. Soon afterwards, the stock price of China Mobile (Hong Kong) and China Unicom has risen.
China Telecom (Guangdong) has released "wanderer returning home" service for two purposes: One is that mobile phone rest station can shun the mobile network and reduce the business revenue of China Mobile and China Unicom; The other is that it tries to detect the baseline of supervision and control department. If it fails to show an uncompromising stand, China Telecom (Guangdong) and the subsidiaries of China Telecom in the various places will take further action.
Section III Operators
China Mobile
Trend: Due to successful cooperation in 2002, China Mobile cooperates with the CCTV Public Information set up by the CCTV and participates in the CCTV 2003 Spring Festival Party by providing the audience with a variety of interactive means highlighted by color message and dominated by short message based on the short message platform whose special service number is "2003".
Broadcom observation: During the Spring Festival and other festivals, short message service will always increase by times. That China Mobile cooperates with the CCTV Spring Festival Party that has drawn a close attention from the people nationwide is naturally for increasing the quantity of short message and color message. But what is more important is that it will bring the company a huge ad effect. It has signed an exclusive cooperation agreement with CCTV Public Information, thus becoming doubtlessly an early bird in such a golden marketing opportunity.
On January 7, 2003, "China Mobile-Motorola Cup 1st Monternet Wireless JAVA Application Design Competition" got started solemnly in Beijing. The competition mainly aimed at application program development groups and advocated the application of wireless JAVA technology in improving work efficiency, commercial industry, QoS, management income, entertainment, information service and other sectors. It made every effort to lay a foundation for the wireless JAVA value-added service to be released by China Mobile and initiated an opening, standardization, information security, interaction and practical commercialization concept in mobile application and development field.
Broadcom observation: The most distinguished feature of wireless JAVA is that application programs prepared with it can be compatible with different network protocols, therefore, it provides an opening platform for various programs. With a mobile phone terminal that supports JAVA functions, clients may download JAVA application software as they like and can enjoy various services like those on the Internet conveniently. Being a whole new wireless data value-added service, wireless JAVA will greatly enrich the services of the Monternet, thus improving its core competitive edge.
Now, China Mobile is contacting domestic mobile phone manufacturers in an active manner and discussing with them about the release of domestic color message mobile phones, which may be sold in the market during the 1st quarter of this year.
Broadcom observation: One of the bottlenecks for the spread of color message mobile phones is their exorbitant price. According to the investigations by an investigation and research company in Beijing, Shanghai and Guangzhou, consumers think that color message mobile phones are too expensive. Besides, their insufficient supply has also limited the spread of color message service seriously. China Mobile has always been discussing with foreign manufacturers that released color message mobile phones in early days. Its contact with domestic mobile phone manufacturers this time both intends to increase supply to meet market demands and the take advantage of the competitions between domestic and foreign mobile phone manufacturers in order to reduce the price of mainstream color message mobile phones to RMB3,000, a psychological baseline.
New service: On January 8, 2003, China Children and Juvenile Funds and China Mobile held a "8858" mobile phone public welfare message opening ceremony in the Great Hall of the People. "8858", the special service number of the public welfare message opened by China Children and Juvenile Funds and China Mobile has the implied meaning of "help me, please", being a short message channel specially opened up by China Mobile for the pocket money charity of China Children and Juvenile Funds. Editing short message "2" or "30" on the mobile phone and sending it to "8858", the mobile phone clients of China Mobile can donate 2 or 30 Yuan to directly participate in the "Pocket Money Charity" activity.
Broadcom observation: Looking from another angle, this cooperation is more than just for improving the image of China Mobile through public welfare activities, rather it embodies the application of short message platform-based mobile phone paid service in the industry. The sector has unanimously agreed that short message has a high gold content than public application. China Mobile has also been devoting to the development of industry application market. This cooperation combines public welfare activity with industry application and can be reputed as a brilliant idea in industry application marketing. However, new things need time for perfection after being released. Security of mobile phone payment must be guaranteed and attention should also be paid to how to propagate this activity. Now, there are already some people who have played a practical joke on "8858", which will bring some negative effects on the reputation of China Mobile.
China Unicom
Trend: On the celebration for the 1st anniversary of CDMA held on January 8, 2003, Mr. Wang Jianzhou, president of China Unicom, announced that CDMA users would increase by another 13 million and its total number of users will surpass 20 million by the end of the year.
Broadcom observation: By the end of last year, CDMA users increased to 7 million as expected and the target set last year has been fulfilled. But China Unicom has paid dearly for it. Having taken such bundling measures as free mobile phone after depositing phone charges in advance, phone charge deduction, etc., China Unicom has borne huge marketing costs. It must amortize the subsidy costs of a 2,000 Yuan mobile phone within 18 months on average. In this case, the amortization of the costs will reach its peak in 2003. Under such a financial pressure, China Unicom has to decide whether to conduct promotion or not in order to develop 13 million users.
But the figure 7 million alone has indicated that its CDMA users have reached a certain scale. although the expected avalanche effect has yet come, its CDMA users have indeed developed more and more rapidly, which cannot be ignored even if promotion becomes increasingly intense.
On January 27, 2003, China Unicom signed an agreement with Mr.Yao Ming, whereby Mr.Yao Ming will become the image maker of China New Time and Space CDMA. The agreement covers two years and its amount is 30 million Yuan. 2003
Broadcom observation: China Unicom has been acting rapidly regarding the invitation of Mr.Yao Ming to act as its image maker and the price (30 million Yuan) has also proven its determination of reshaping its CDMA image to a certain extent. This year, the succeeding propaganda and spread expenses centering on Mr.Yao Ming's ads will be a matter of hundreds of millions of Yuan. China Unicom's selection of him as its image maker plus its succeeding propaganda and spread, it is certain to promote the CDMA market greatly considering Mr.Yao Ming's current popularity. However, some also say that Mr.Yao Ming will mainly attract people's eyeballs and CDMA does not lack popularity, so such an idea of China Unicom may not achieve its effects as anticipated.
Due to violation of stipulations, China Unicom (Beijing) has been fined RMB300,000 Yuan by the supervision and control department. A spokesman from China Unicom said that the supervision and control department had pointed out that the charging stipulations in the charging plan provided by the China Unicom to its clients was lower than the range of governmental guiding price. During the latter half of 2002, China Unicom released, while devoting major efforts to promoting CDMA, GSM monthly card, 200 Yuan per month and local phone no-ceiling consumption. Since they were a radical departure from the price set by the responsible department, therefore Beijing Communication Administrative Bureau has imposed a fine on it.
Broadcom observation: CDMA on one side and GSM on the other side. CDMA propaganda and promotion have made GSM users feel slighted. That China Unicom has released GSM monthly card is also for maintaining its over 50 million users. With market competitions becoming more and more intense, fight for price has also become fiercer and fiercer. Operators' companies in the various places have all begun to find loopholes in order to use "price", the most powerful lever at present, to "pry" users to ensure their own development. This has become more and more intense and is not good to the Chinese communication market.
On January 28, 2003, China Unicom (Shanghai) announced that it had opened its CDMA1X network completely, thus becoming the first to do so among the subsidiaries of China Unicom in all parts of the country. This 2.5G new mobile communication network will be devoted to data services. Mr. Zhao Le, general manager of China Unicom (Shanghai), said that when technical advantages were brought into further play, it would bring a more powerful momentum to CDMA development.
Broadcom observation: In the face of the strong pressure from China Mobile's GPRS, it is the only choice of China Unicom to release CDMA1X as soon as possible. Earlier, China Unicom had both increased investment in the construction of CDMA1X network and strengthened propaganda in CDMA1X. This time, China Unicom (Shanghai) has packaged value-added services into one brand, namely, Unicom's Limitless U-MAX. This brand contains five categories of application:
- "Interactive Visual Field" based on mobile phone browsing service
- "Color E" based on mobile phone multimedia information service
- "Entertainment Space" based on mobile phone download service
- "Positioning Star" based on GPS positioning service
- "Palmtop Broadband" based on PDA and notebook computer.
These services will be released one by one on February 15.
Section IV Terminal Manufacturers
Commenting on the coverage by relevant media that the national sales chief supervisor and the manager of the Financial Department of Panda mobile phone (Nanjing headquarters) and the general managers of its subsidiaries in Sichuan, Hunan, Hebei and Guangdong have been dismissed, Hua Yongqing, assistant to the general manager of Panda Mobile Equipment Co., Ltd., said that in reality it only involved the national sales chief supervisor and others were all the intermediate rank cadres of the company. It was only a normal personnel reshuffle subject to the development target in the new year.
Broadcom observation: Lately, Panda mobile phone has drawn attention frequently. It has separated from Ericsson and cooperated with Microcell and then won No.1 on the CCTV. All of them have caused a big stir in the sector. It has weaned its technology, integrated its sales channels and intensified propaganda, which have all displayed its ambition clearly. Although Panda has clarified in the public to avoid negative effects, such a personnel reshuffle and the actions taken earlier still indicate that Panda has made preparations at any costs in order to march forward and it will be a stride.
"Besides developing GSM mobile phone continuously, TCL Mobile will also get involved in CDMA mobile phone completely and plans to enter the Xiaolingtong market.", said Yang Xiaoxi, vice general manager of the Marketing Headquarters and general manager of CDMA Business Department of TCL Mobile Communication Co., on January 22, 2003. He continued, "The Company will operate Xiaolingtong mobile phone service via its two companies, namely, TCL Mobile and TCL Communication".
Broadcom observation: That TCL Mobile operates Xiaolingtong based on CDMA450M technology and TCL Communication operates Xiaolingtong based on PHS technology are due to both external and internal reasons. The external reason is that Xiaolingtong has developed to such a condition that it is difficult for it to turn round. Although being threatened by 3G, it can still remain lucrative for some time. The internal reason is that TCL Group wants to strike a balance between its subsidiaries. TCL Communication needs to improve its strength to get enough attention in the group.
On January 17, 2003, the Consumers' Association in Beijing, Shanghai, Tianjin and Chongqing, four municipalities directly under the Central Government, invited consumer representatives and relevant governmental departments in Beijing to hold a "group consultation" on the conditions one year after the Stipulations on the Responsibilities of Repair, Replacement and Return of Mobile Phones (Stipulations on Mobile Phone Three Responsibilities) and proposed 11 suggestions on modification. The journalist has been told by the relevant person from the association that the 11 suggestions have been submitted to the Ministry of Information Industry and relevant departments for the hope that it can be modified and perfected in a timely manner.
Broadcom observation: Upon being published, the Stipulations has been reproached due to its stipulations on "return validity period", "depreciation rate" and others, which have become the focus of disputes. After all, we cannot know thoroughly the performance of a mobile phone within 7 days only and return is also unrealistic, since the mobile phone will become penniless after 200 days, when return will be meaningless. The suggestions proposed by the Consumers' Associations this time suggest to modify the above key accordingly. Besides, they've also adjusted some clauses for the good of consumers. Only when their rights and interests are guaranteed can the mobile phone market become standardized and prosperous.
Section V SP
From January 22 to 23, 2003, Monternet SP Forum 3rd Conference and Monternet Partner Spring Festival Fraternity was held in Beijing and the high management of China Mobile and the SP high management of dozens of companies attended it.
Broadcom observation: The conference discussed WAP business opportunities under the current situation, which has, after being ignored for a long time, appeared in front of us again. Only that the current technology, application and market have experienced tremendous changes compared with the previous two years. Now, conditions for spreading WAP are much better. The conference fully shows that operators have paid more and more attention to forging the mobile data service industrial chain and cooperation and win-win are the necessary conditions for the success of mobile data service.
Gotone users use the "12586 voice online", a brainchild of cooperation between Tencent and China Mobile, to dial long-distance calls, whose charges are as low as 0.20Yuan/m in most cases. Two-way charges have already contained all the charges of both mobile phone and long-distance calls.
Broadcom observation: The cooperation between Tencent and China Mobile is good to both of them. China Mobile can take advantage of QQ's huge user group to increase its traffic. Since QQ users are dominated by youngsters, it can help China Mobile cultivate trusts to such brands as Gotone and Shenzhouxing among groups with the most high potential consumption capability. Meanwhile, Tencent can get a percentage from it. Such a whole new service will also allow Tencent to know communication operation gradually.
Section VI Analysis and Forecasts
1.Mobile communication operation market will witness cut-throat competitions
Users of China Unicom have surpassed those of China Mobile by 30%. The company will strive to increase its CDMA users by 13 million this year and its CDMA1X will be spread completely very soon. In the face of such situation, China Mobile can by no means wait and see. Xiaolingtong users have exceeded 10 million and Xiaolingtong can be found in all places except Beijing and Shanghai. There are more and more cries for China Telecom and CNC to get 3G license and the two operators have already begun making preparations for 3G operation. The year 2003 is an important juncture to all the four leading operators. The Chinese mobile communication industry is still developing rapidly and nobody wants to miss this golden opportunity.
In view of the competitions among operators last year, price fight has always been a treasure. Depending on its charges which are the same as local phones, Xiaolingtong has applied pressures on China Mobile and China Unicom time and again and the two companies have to reduce their charges. Such promotion measures have appeared again and again as monthly card and Benditong that have been walking along the baseline stipulated by responsible departments. The direct consequences of such a competition are the reduction in operators' revenue, as well as obstacles in interconnection and intercommunication, which have damaged users' interests. This year, operators will certainly use price fight as a weapon frequently for competitions. However, their marketing capability has been improved greatly after being tempered for one year. Hence, market competitions will be on a higher level and they may not be as smoke-laden as price fight, but their intensity will be in no way less intense.
2. 2.5G will become a new focus for competitions
Last year, China Mobile released GPRS and color message, which have ushered the Chinese mobile communication market into 2.5G era. Thanks to its high speed and multimedia feature, 2.5G will ensure mobile communication wider applications. Although China Unicom has been launching a publicity campaign for CDMA1X which also belongs to 2.5G, it has not released it in a true sense after much delay due to such problems as network construction and optimization and application development. Therefore, competitions on 2.5G last year were only confined to paper. China Unicom (Guangdong) and China Unicom (Shanghai) have formally released CDMA1X and Color e, signifying that 2.5G competitions have stepped into a substantial stage.
GPRS versus CDMA1X and color message versus Color e. They have fought endlessly over whose ones are better. Now, they have all entered the market formally and consumers are sure to give the fairest answer.
3. Mobile phone price has dropped more and more quickly.
Domestic mobile phone has always been a leading driver which is blame for the drop in mobile phone price in the Chinese mobile phone market. This year, the effect will become more obvious. With the continuous growth of the Chinese mobile phone market since last year, domestic brand mobile phone manufacturers have expanded their output capacity one by one this year. Statistics show that there are already 36 mobile phone manufacturers, whose total annual output capacity has reached 250 million pieces. Numerous foreign mobile phone manufacturers, such as Nokia, Motorola and Sumsung, are also expanding their production scale in China. Statistics show that their annual output can also reach around 50 million pieces.
Even if the development speed of users is taken into consideration, a 300 million output capacity and 200 million users will make the output capacity of mobile phone manufacturers in excess. It has been estimated by relevant investigation and research departments that demands on mobile phones range from 50 to 70 million this year, whereas the supply of domestic mobile phones alone will reach 170 million. However, investment has been made and equipment has been installed, which won't lay idle naturally. Since supply exceeds demands, price is certain to drop, which cannot be avoided.
4. Scale up SP
The larger the scale, the higher the value. Such a law that is applicable to network operators has also been spread in SP. If we look at SPs, which are in the front rank in terms of revenue in the Mobile Dream Network now, all are famous magnates. Many SPs have already realized this and started horizontal cooperation and coordination. Among them, the most attractive is the merger between Sina and Guangdong Xunlong. After the merger, Sina's wireless service revenue will increase by one time and its paid users will increase by 2 million. Its domestic wireless service sales personnel will increase by two times, thus its wireless service will be expanded to a large extent. Only a company can scale itself up can it get a lion's share amid the intense market competitions. <<
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