Telecoms

Netting new subscribers?

A pedestrian response to 3G so far – most worryingly, for China Mobile

An Apple a day: will iPhone come to the rescue?

It was only 10 years ago that a mobile phone would have drawn a crowd in China. Mention of the internet would have drawn blank looks, too.

Times have changed. Young and old are now not only shouting into their phones, they are also using them to send text messages, play games and even to surf the web.

According to the latest China Internet Network Information Centre (CNNIC) report, 155 million Chinese are now using their mobile phones to go online.

The figures should be encouraging for the country’s telecom operators. China Mobile, China Telecom, and China Unicom have collectively spent over Rmb80 billion ($11.7 billion) in the first half of 2009 developing their 3G networks.

So is the 3G bandwagon finally starting to roll? Not quite. Despite the CNNIC numbers, the mainland’s fledgling 3G mobile network is still struggling to attract customers.

According to the South China Morning Post, China Mobile and China Telecom, the nation’s two leading 3G operators, might fall short of subscriber targets because of low demand.

Getting 3G mobile services off the ground has been painful in many markets, and China is proving no different.

So far China Mobile has lured 959,000 subscribers to its 3G service – but that’s out of a customer base of 493 million.

The operator remains the leader in the world’s largest mobile market by subscribers, but is wrestling with an immature domestic TD-SCDMA technology that Beijing wants to encourage as a standard.

Meanwhile, China Telecom has attracted about a million users since it launched its own 3G service in March. The service is based on the (foreign) CDMA2000 technology.

There is another fly in the ointment for China Mobile: the iPhone.

The third of the telecom troika, China Unicom, will get a leg-up in the fourth quarter when it starts selling the popular 3G-enabled Apple iPhone in conjunction with its own foreign standard (WCDMA) .

Industry observers believe that the teething problems in the homegrown standard make existing China Mobile customers reluctant to switch over to 3G.

The foreign standards, on the other hand, have a proven track record, giving China Telecom and Unicom a marketing edge.

China Mobile also suffers from a lack of TD-SCDMA compatible equipment such as mobile phones and netbooks (see WiC20).

Most international manufacturers make products compatible with globally accepted 3G standards, WCDMA and CDMA2000, and are reluctant to design products specifically for TD-SCDMA.

“Chinese operators have the habit of launching new services before they are well-prepared,” says Wang Yuquan, senior consultant at research firm Frost & Sullivan. “That significantly hurt the user experience for the 3G services.”

Wang reckons that most of the higher-end subscribers in China were still mostly using voice services and have not yet made the transition to 3G.

A recent poll on Sina.com, the popular internet portal, suggested that only 22% of 363,000 respondents would upgrade to the 3G network by the end of the year.

But at least China Mobile has been planning for a poor year. “This year, the company will meet its targets because at the end of last year, we had expected things to be bad,” says Lu Xiangdong, China Mobile’s executive vice-president. “So our targets were rather low.”

The telecom giant originally aimed to have 10 million TD-SCDMA users this year but industry observers said the company had since lowered its hopes to three million.


© ChinTell Ltd. All rights reserved.

Exclusively sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.