China is tussling with India to be the fastest-growing mobile market in the world. It is still dominated by 2G, but the rollout of 3G is in full swing. After recent restructuring, the market is dominated by three large full-service operators offering fixed-line, mobile and broadband services.

The Chinese telecommunication market has several notable strengths. One is its sheer size. Another is the Chinese government’s determination to support the country’s telecommunications industry, seen for instance in the launch of the home-grown 3G standard TD-SCDMA. And a third is its strong domestic manufacturers, such as Huawei Technologies and ZTE. 

Qinghe Tian, Strategic Marketing Manager at Ericsson China, says the Chinese government has recently taken several actions to encourage competition and innovation in the country’s telecoms industry. In October 2008, China’s mobile market completed a restructuring phase, which led to the creation of three full-service operators providing both mobile and fixed-line services, as well as broadband access.

Besides its unique 3G standard, Tian says China also takes pride in having the fastest-growing mobile market in the world, neck-and-neck with India. At the end of 2008, the country’s mobile market had a subscriber base of around 620.5 million and a penetration rate of 46 percent. GSM accounts for the bulk of the market, 95.3 percent in October 2008.

China Mobile dominates
The dominant operator by far is China Mobile (GSM) – the largest mobile operator in the world in terms of subscribers, with 440 million, corresponding to roughly 73 percent of the market. Its closest rival is China Unicom (also GSM), with 130 million subscribers and a market share of roughly 22 percent. 

China Telecom (CDMA) occupies third place, with about 28 million subscribers and a market share of 4.7 percent. It inherited its CDMA network from China Unicom in November 2008 and although the company has made improvements to its network, it has had difficulties increasing its subscriber base because Chinese users generally prefer GSM to CDMA.  

Tian says that all three operators have recently dropped mobile tariffs to attract subscribers, which has had a negative impact on their ARPU.

In the fixed segment, the largest operator is China Telecom, with nearly 230 million fixed-line subscribers. As a whole, the fixed-line telephony market in China is shrinking. Users are increasingly migrating from fixed to mobile. In the fixed segment, operators now focus more on the broadband business, which is starting to boom in China, Tian says. China Telecom, for instance, has about 45 million broadband subscribers.

All three operators have started deploying 3G. For 2009, China Mobile has announced plans to provide 3G (TD-SCDMA) services to 38 cities on the Chinese mainland before the middle of the year, and to 200 by the end of 2009. Meanwhile, China Unicom deployed WCDMA networks across seven cities in 2008, and plans to expand to all major cities by mid-2009 and 220 medium-sized cities by the end of the year. China Telecom (CDMA2000) is expected to launch commercial 3G services soon, but has not yet announced any official commitments.

Popular services
Because China is basically still a 2G country, the most popular services today are voice and SMS, Tian says. One service starting to gain momentum is embedded modules for wireless access, such as data cards.

“China Telecom is set to be the first operator to commercially launch 3G-related data services, and the other two will likely follow suit,” he says. “The competition is stiff and I expect the low prices and high-speed connections will make this a very popular service.”

Another 3G service that Tian expects Chinese operators to push is mobile video calls.

“It’s kind of the symbol for 3G and very new for Chinese users, offering them an enhanced mobile experience,” he says.

“I believe WAP has a chance to become popular here, as well as streaming, gaming and music-related services. As in the rest of the world, because user habits have been cultivated through the use of the internet, I expect Chinese consumers will also require internet-type services in their mobiles.”

Tian believes mobile internet has a bright future in China: “All operators have the ambition to provide wireless access to the internet,” he says. “If we will see anything like a ‘killer application’ in China, I think this is the one. But operators need to ensure that the service is fast, easy to use, comes at a reasonable price, and offers attractive content.”

Working with application partners
Chinese operators are increasingly working together with partners in different groupings to build attractive service portfolios, Tian says. China Mobile, for instance, collaborates with Vodafone and Softbank on its Joint Innovation Laboratory (JIL) to promote the development of new mobile technologies, applications and services. JIL is expected to help accelerate the commercial deployment of mobile internet services, including widgets for different types of information services, such as weather forecasts.

Chinese operators generally want the entire telecom industry following standards so that services work smoothly on their networks and handsets as soon as they are introduced. Chinese operators support application developers in different ways, Tian says. “In some cases, they just set up standards for them. Sometimes they also help them build a development environment, and in some cases they even provide funding.”

Tian says that Ericsson China sees it as its responsibility to help operators build attractive application portfolios to support the platform business, and has been working closely with them to achieve this for a few years.

General facts:
Population: 1.33 billion (2008)
Median age: 33.6 years 
Literacy: 90.9 percent
Economic growth: 9 percent (GDP real growth rate 2008)

Telephony facts:
Fixed lines: 348 million (2008)
Mobile subscriptions: 620 million (2008)

By Benny Ritzén