China Mobile to Retain Revenues Crown
The "Communications Markets in China" report says the 2008 restructuring of China's telecom services sector that resulted in the creation of three full service providers will impede China Mobile's runaway growth but not impinge upon its leading position in the market.
The report notes that China Mobile's share of total telecom revenues in China is set to rise by 2.2 percent to 59.1 percent by 2014, but adds: "That figure would likely have been significantly higher if the restructuring had not taken place."
If the Pyramid team's projections are accurate, China Mobile is on course for annual revenues of more than $110 billion in 2014, up from nearly $70 billion in 2009.
China Mobile's position will be underpinned by a 7.4 percent compound annual growth rate (CAGR) in mobile subscriptions that, Pyramid's analysts estimate, will see the Chinese mobile market hitting the 1 billion subscriber milestone in 2012, and reaching 1.1 billion in 2014, when the mobile penetration rate will hit 80 percent, compared with 52 percent at the end of 2008.
Pyramid predicts that 2012 will also be the crossover year in terms of technology, with GSM (2G) subscriber numbers increasing until then, after which consumers will migrate to TD-SCDMA, China Mobile's 3G technology.
Significantly, the report does not cite any limitations to the rollout of TD-SCDMA, and barely mentions the CDMA2000 and WCDMA 3G alternatives of China Telecom Corp. Ltd. (NYSE: CHA) and China Unicom Ltd. (NYSE: CHU), respectively, suggesting that the dominance of China Mobile's position will be enough to secure the success of TD-SCDMA.
However, Pyramid also begins to include market share for LTE from 2012 in recognition that China Mobile will introduce the next step in its evolution path sooner rather than later. (See China Mobile Fast-Tracks TD-LTE .)
Pyramid also suggests that the turning off of PHS (Personal Handyphone System) services by 2011 -- a move that will clear the way for TD-SCDMA to take full ownership of the 1800-1900 MHz band -- will further reduce the mobile market shares of China Telecom and China Unicom, as China Mobile will likely sweep up the majority of the 64 million PHS stalwarts with its stronger brand and coverage.
The main opportunities for China Telecom and China Unicom to provide a wireless services challenge to China Mobile will come in rural areas, but the lower average revenue per subscriber (ARPS) rates from rural users means that any gains in numbers will likely not boost their shares of total revenue.
The report's author, Daniel Yu, highlights the bundling of double-, triple-, and, ultimately, quadruple-play services as the best weapons in China Telecom's and China Unicom's services arsenals.
"Both operators have already been offering packages using various combinations of voice, data, and IPTV services, and now with the new line of services acquired, they can offer quadruple plays at an attractive price point to high-end users," notes Yu.
Indeed, both telcos have been rolling out fiber aggressively since 2007 and continue to do so. Pyramid predicts that FTTH will increase at a CAGR of 104 percent between 2009 and 2014, taking the number of users from 1.5 million to 50.8 million. (See Ericsson Scores GPON Wins in China.) — Catherine Haslam, Asia Editor, Light Reading