China Adds 106 mil. Mobile Subscribers During 2009

According to the statistics released by the Ministry of Industry and Information Technology (MII), the country's main telecoms businesses generated revenues of 842.43 billion renminbi (US$123.38 billion), up 3.9% y/y. Revenues generated from mobile services increased by 13.2% y/y in 2009, and its proportion of the total major telecom business revenues reached 60.43%, up by 5.00 percentage points from 2008. Meanwhile, the proportion of the revenues of local fixed telephone services, long-distance calls and data communications declined by 3.45 percentage points, 1.13 percentage points, and 0.42 percentage points respectively, compared with the figures a year earlier. The country's telecoms operators also invested a total of 372.49 billion renminbi in the construction of telecoms infrastructure during 2009, up 26.1% from the previous year.

The MII also reported that the country added 106.14 million mobile subscribers during 2009, taking the total base to 747.38 million at the year-end. The number of fixed-line subscribers decreased by 26.67 million during the year to 313.69 million, including 19.78 million in urban areas and 6.89 million in rural regions. Within the fixed-line subscriber base, the number of subscribers of personal handyphone system (PHS) dropped by 22.94 million during the year to 45.99 million, with its proportion in the fixed-line subscriber base dropping to 14.7% at end-2009 from 20.2% a year earlier. In addition, the number of broadband Internet access subscribers increased by 20.35 million during the year to 103.23 million, while the subscriber base of dial-up internet access dropped by 3.57 million to 8.71 million.

Outlook and Implications

• Growth Trends by Segments: The statistics demonstrated that China's mobile market continued to expand rapidly last year, while the fixed-line telephone businesses extended its decline as the result of high competition from mobile services. During 2009, competition in the mobile market significantly intensified following the entry of China Telecom. A combination of aggressive network expansion and service tariff cuts by all three major operators had helped simulate further growth of the mobile subscriber base. By the end of 2009, mobile penetration had reached 56.3%. In the fixed-line segment, however, although bundled service packages offered by China Telecom and China Unicom have, to some extent, helped maintained the subscription rate of traditional fixed telephone services, their PHS services continued to lose customers rapidly, as these customers migrated to full-mobility mobile phone services. Meanwhile, the growth of broadband Internet subscriber base continued to be robust, indicating a strong growth area for the operators.
• 3G Service Development: A key focus of the Chinese telecoms sector during 2009 was the roll-out of 3G services. The country's three major operators officially launched 3G services last year following the issuance of 3G licences at the beginning of the year. According to the MII, the country's total 3G users reached 13.25 million at the end of 2009, including 5.51 million users of the locally developed TD-SCDMA 3G technology. China Mobile Ltd., the Hong Kong listed unit of the country's largest mobile operator, reported 3.41 million users of the TD-SCDMA at the end of last year. The additional TD-SCDMA users might have been acquired by its unlisted state-owned parent, China Mobile Communications Corp. China Unicom (Hong Kong) Ltd., the listed unit of China United Network Communications Group Company Limited, said earlier it had 2.74 million W-CDMA users at the end of 2009. According to the MII, the country's three major telecoms operators also invested a total of 160.9 billion renminbi in constructing 3G mobile networks in 2009. The regulator said China Mobile, China Unicom, and China Telecom built a total of 325,000 3G base stations last year.
• Growth Prospect: Looking ahead, although the growth of mobile subscribers will continue to be strong compared to other countries, it is likely to slow down compared to the levels registered in the previous years, as mobile penetration level has exceeded 50%. The majority of the people who do not have a mobile phone yet in the country are living in the rural and remote areas. The operators will also focus more on the development of their new 3G services and advanced value-added services. In 2010, although 3G network investment will remain strong, as operators continue to expand their network coverage, the combined 3G investments of the three operators are likely to be lower than the level last year. So far, China Mobile's market share in the mobile sector has not been notably eroded by rising competition from its two smaller rivals, but the competitive landscape could show more obvious changes by the end of this year, particularly on the 3G front.