It seems like no one bothered to tell China's mobile operators that the world was in the midst of a severe economic recession, as all three operators have continued to amass subscribers well into 2009.
The world's largest mobile operator China Mobile added over 40 million subscribers through July to bring its total to 497 million subscribers while rivals China Telecom and China Unicom added 14 million and eight million respectively to bring their totals to 42 million and 141 million.
The news gets even better for the local operators considering the fact that the aggregate mobile base of 680 million subscribers only equates to a 51% penetration rate, meaning that there are still hundreds of millions of mobile subscribers to be added in the country and China is expected to have a triple-digit penetration rate within the next five years.
Despite the massive growth in the Chinese market, the level of competition in the country is nowhere near the extreme level operators face in other large Asian markets such as India and Indonesia, which each have more than ten wireless carriers. In fact, China Mobile still has the highest market share of any Asian mobile operator, boasting a 73% subscriber market share as of July 2009.
However, with the dust settled from China's massive industry restructuring and 3G licenses issued and China's mobile market set to enter a new phase of development all three operators are gearing up for new product strategies which will likely significantly intensify competition.
All three Chinese carriers seem to agree that 3G uptake has been weak due largely to a lack of enabled devices and as such have been on a mad dash to increase the number of affordable mobile broadband enabled devices. China's smallest operator, China Telecom, recently placed an order for four million 3G handsets, which will retail between 500 and 1,000 yuan ($73 and $146). The operator is confident that its CDMA network will give it a competitive edge in the market and expects to have over five million 3G subscribers by the end of the year and over 130 million by 2012.Second-place China Unicom has also reportedly purchased five million iPhones, and while the impending deal with Apple has yet to be finalized, the fact that China Unicom will have the most coveted mobile device in the world and will also benefit from the massive economies of scale enjoyed by W-CDMA should give it an advantage in the 3G space and will help lure high-end-users to its network.
Not to be outdone, China Mobile also has aggressive ambitions in the 3G market. The operator has gotten off to a slow start in the 3G market as TD-SCDMA has floundered in the market largely due to the fact that there are only about 50 enabled devices in the market and hence is looking to new services and applications to compete in the market.
The operator is heavily touting its "Ophone" which uses its unique OMS operating system. The Ophone represents a bold move by the company to reassert its control over its mobile subscribers by taking a more active role in the mobile internet value chain and recently launched its own online application store to bolster the device's business model.
China Mobile already has a healthy 11% of its revenues coming from non-SMS data services mostly on EDGE, which bodes well for future mobile data uptake. The operator has already teamed up with global wireless heavyweights such as Softbank, Verizon Wireless and Vodafone to set up its Joint Innovation Lab application project that cover more than one billion subscribers to bolster the initiative. Overall China Mobile is expecting 80 million 3G subscribers by 2011.
The launch of 3G services in China is doing more for the market than simply giving customers access to wireless broadband technology. 3G is forcing China's mobile operators to explore new business models, bring new devices into the market and will bring a new wave of competition into the world's largest wireless market.
Marc Einstein is an industry manager for Frost & Sullivan