Look Towards A New Future

Dec 19, 2011

China Telecommunications Market Report Q1 2012

We have incorporated the latest telecoms data from China’s Ministry of Industry and Information Technology and Chinese operators in our forecast scenarios, which have been extended to 2016. We have upgraded our expectations for China’s fixed-line industry after the pace of the decline in the number of subscribers showed signs of a slowdown. We now forecast 286mn fixed-line subscribers in China by end- 2011, up from our previous forecast of 273mn. While we have largely retained our forecast for the number of mobile subscribers in China, we have revised our expectations for the number of 3G subscribers. The transition from 2G to 3G subscriptions has accelerated and the latter formed the main subscriber growth driver in Q311. We expect 111mn 3G subscribers in China by end-2011 and we forecast this number to increase to 773mn by 2016, a penetration rate of 56.2%.

China Telecommunications Market Report Q1 2012

The acceleration in fixed-to-mobile migration could be attributed to mobile operators’ heavy emphasis on promoting 3G services, which are significantly more lucrative than conventional 2G services. China Unicom reported that its 3G ARPU in the first nine months of 2011 was three times higher than that of 2G. However, we believe that operators have yet to reap the rewards as network expansion and marketing costs weigh heavily on their profitability. Nevertheless, we believe that the aggressive tactics are necessary to secure market share in the fledgling market, before shifting their attention to improving their profit margins. At the end of September 2011 China Mobile had a 42.4% market share in the 3G segment in September, while China Unicom and China Telecom had 29.7% and 27.9% respectively. By comparison, China Mobile had a dominating 67.4% in the overall Chinese mobile market.

Taiwan’s National Communications Commission announced in September 2011 that it has approved Chunghwa Telecom’s submarine cable proposal, which would link Kinmen (an outlying island of Taiwan) and Xiamen (a city in China’s south eastern cost). China’s three mobile operators are all involved in the project and they would share 50% of the construction cost, which is expected to reached TWD200mn. The establishment of a direct communication link between China and Taiwan would boost the quality of services while reducing costs as data traffic, currently, is re-routed to a third-party country. This development bodes well for consumers, and businesses in particular, as companies are increasingly embracing high-bandwidth data services such as cloud computing and video conferencing.

On the macroeconomic front, the after-effects of China’s credit binge are starting to kick in, with a number of our core macroeconomic and financial market views playing out. With real GDP growth at its lowest level since 2009 in Q311 at 9.1%, we caution that the macroeconomic conditions are likely to deteriorate further as there is no easy cure for the credit hangover. Meanwhile, the Communist Party of China’s ability to govern could be seriously tested by the myriad economic, social and environmental challenges in future decades. The best case scenario for any eventual political transition would entail an elite-led liberalisation of the authoritarian system, while the worst case scenario would involve a violent change of regime.
Executive Summary
SWOT Analysis
China Wireline (Fixed-Line and Broadband) Market SWOT
China Mobile Market SWOT
China Political SWOT
China Economic SWOT
China Business Environment SWOT
Risk Reward Ratings
Asia Pacific
Table: Asia Telecoms Risk Reward Ratings Q112
Industry Forecast Scenario
Table: China Telecoms Secto
Table: China Telecoms Secto
Fixed Line
Table: China Telecoms Secto
Table: China Telecoms Secto
Market Data Analysis
Mobile Market
Table: China Mobile Market, September 2011
Table: China Mobile Net Additions, September 2011
Table: China ARPU Levels (CNY)
Table: China 3G Mobile Market, September 2011
Mobile Contract Wins
Table: Mobile Contract Wins 2009-2011
Regional Mobile Markets
East China
Table: East China Regional Mobile Markets
Central China
Table: Central China Regional Mobile Markets
West China
Table: West China Regional Mobile Markets
Mobile Operator Data
Table: China Mobile Market Overview
Table: China Mobile
Table: China Unicom
Table: China Telecom
Mobile Content
Regional Outlook
Table: Selected NFC Developments, 2011
Country Outlook
Table: China Mobile VAS Revenues (CNYbn)
Mobile Broadband
Mobile TV
Value-Added Services Timeline
Table: Selected VAS Services Launched, 2009-2011
Handset Market Share
Fixed Line
Table: China Local Access Market, September 2011
Regional Fixed-Line Markets
East China
Table: East China Regional Fixed-Line Markets
Central China
Table: Central China Regional Mobile Markets
West China
West China Regional Fixed-Line Markets
China Telecom
China Unicom
Broadband Content
Table: China’s Internet Applicatio
Regulatory Environment
Table: China Regulatory Bodies And Their Responsibilities
Industry Developments
Regulatory Developments
Competitive Landscape
Competitor Analysis Tables
Table: Key Player
Table: Selected Operator
Company Monitor
Table: HTC: Q211 Profi
Operator Profiles
China Telecom
China Mobile (Hong Kong)
China Unicom
Country Snapshot: China Demographic Data
Section 1: Population
Table: Demographic Indicators, 2005-2030
Table: Rural/Urban Breakdown, 2005-2030
Section 2: Education And Healthcare
Table: Education, 2002-2005
Table: Vital Statistics, 2005-2030
Section 3: Labour Market And Spending Power
Table: Employment Indicators, 2001-2006
Table: Consumer Expenditure, 2000-2012 (US$)
Glossary Of Terms
Table: Glossary Of Terms
BMI Methodology
How We Generate Our Industry Forecasts
Table: Key Indicators For Telecommunications Industry Forecasts
Telecoms Business Environment Ratings
Risk/Reward Ratings Methodology
Ratings System
Table: Ratings Indicators
Table: Weighting Of Indicators