China’s telecom sector revenue grew 7 percent...

China’s telecom sector revenue grew 7 percent in 2008

Capex for 3G wireless and service convergence will spur growth

by Ek Heng, Asia-Pacific Correspondent

Following restructuring, China’s three main telcos (China Mobile, China Telecom and China Unicom) attained a combined revenue of CNY 813.99 billion (US$119.1 billion) for the full-year in 2008 registering a growth rate of 7 percent.

The total earnings of China Mobile, China Telecom and China Unicom were revealed in statistics released by the country’s Ministry of Industry and Information Technology (MIIT). The country’s telecom sector spent CNY295.4 billion (US$43.1 billion) on capital expenditure in 2008, a nearly 30 percent increase.

At the market segment level, the revenue from the cellular sector grew by 15 percent to CNY 448.5 billion (US$65.6 billion) in 2008 with total mobile subscriptions countrywide increasing by 93.2 million to total 641.2 million by year-end 2008. However, there were 24.8 million less customers for the fixed-line service which totalled 341 million by year-end 2008. The figures show a decline of 9.4 percent in revenue from fixed local phone whereas earnings for long-distance calls were lower by 7 percent.

In 2009, China entered a new era with the award of 3G licenses to China Mobile, China Telecom and China Unicom to implement their respective TD-SCDMA, CDMA2000 and WCDMA mobile platforms.

Full 3G service by 2011

Indications are that the three operators will have 3G services covering all of China by 2011. Before that, a phased approach will see 3G services being implemented progressively later this year as different phases of network construction and upgrading are completed. Against previous estimates of US$29 billion expenditure, the latest figures for 3G developments for 2009 attribute US$8.6 billion to China Mobile whereas China Telecom and China Unicom have reportedly earmarked US$4.4 billion each.

To capitalize on first-mover advantage, the carriers are stepping up the pace in issuing equipment tenders and network construction activities. With pilot trials already underway in 10 cities, China Mobile has brought forward its third tender for network construction plans for its TD-SCDMA service. It is targeting to start up 3G services in 38 cities before mid-2009, and increasing to 238 cities by October 2009 with countrywide coverage by 2011.

Meanwhile, China Telecom’s general manager Zhang Jiping was quoted in the media in mid-January 2009 as saying the telco would take another three months to get its 3G CDMA network ready for launch in 100 cities. In the case of China Unicom, the telco has been reported projecting launching its WCDMA services in 55 cities by mid-2009 and expanding coverage to 280 cities by end-2010.

Communication and entertainment

For users, 3G wireless technology paves the way for faster transmission to offer added versatility for communication and entertainment. The technology provides telcos with opportunities to create new income streams through partnerships with content providers. Its multimedia capabilities enable users to make video calls, watch IPTV, access the Internet and use its social networking features.

By the end of 2008, China had 298 million Internet users of which 270 million use wireless broadband access, according to the China Internet Network Information Center. With an Internet usage rate of 22.6 percent, China is ahead of the global average of 21.9 percent.

Monetizing mobile broadband

A Frost and Sullivan report puts the number of 3G users in Asia Pacific at 158.4 million and 121 million the year before. With 3G net additions annually in record number, the report expects that telcos will be eager to monetize 3G external broadband devices, namely dongles and data cards, to complement their mobile broad offerings. It estimates there are currently 5.2 million mobile broadband dongle and data card users in Asia in 2008 with billings exceeding US$1.3 billion.

The report adds that by 2013, more than one in every three new mobile broadband subscriber will use dongles or data cards to give fixed broadband players a run for their money. By then, it projects there will be 37 million users of mobile wireless broadband who will generate revenues of US$7.8 billion.