China Mobile Crunches Its Capex
But in the next three years the Chinese carrier, the world's largest mobile operator by subscriber numbers (527 million at the end of January 2010), plans to rein in capital spending "to meet the new business environment."
The world's largest mobile operator by subscriber numbers says it will cut capex to RMB123 billion ($18 billion) this year, and then to RMB98 billion ($14.3 billion) in 2011, and RMB80.4 billion ($11.8 billion) in 2012. In 2010, just 14 percent of its capex will be spent on the 2G-only network gear, while the remainder will be spent on integrated 2G/3G network infrastructure.
The plan to lower network spend makes sense now that the company has completed the second and third phases of its TD-SCDMA 3G network construction, covering 238 Chinese cities.
According to a report from China Daily, citing figures from the Ministry of Industry and Information Technology, China's three major operators -- China Mobile, China Telecom Corp. Ltd. (NYSE: CHA), and China Unicom Ltd. (NYSE: CHU), built 325,000 3G base stations and invested around RMB160.9 billion ($23.6 billion) on 3G last year.
Investment in the future will be geared more toward driving "value-added" services such as mobile Internet, mobile music, and multimedia messaging (MMS). The company says its value-added business increased by 16 percent compared with 2008, and contributed 29.1 percent, or RMB131.4 billion ($19.2 billion) toward the total revenue of RMB452.1 billion ($66 billion) in 2009.
Revenue from the operator's mobile music service alone exceeded RMB10 billion ($1.5 billion) in 2009, as the number of subscribers to the Wireless Music Club increased by 42.5 percent to 121.3 million. Around RMB18.3 billion ($2.7 billion) in revenues, up more than 41 percent, came from mobile Internet access via the handset, and RMB3.3 billion ($483 million), up 15.1 percent,) from MMS services.
Growth in these types of services appeared to have had a beneficial effect on monthly average revenue per user (ARPU) in the second half of 2009, as the figure grew to RMB77 ($11.28) by the end of the year from RMB75 ($10.98) during the first six months of the year. But more significantly, the monthly ARPU for the whole of 2009 fell from 2008's RMB83 ($12.16).
ARPU has been on a general decline for some time now, and it will be interesting to see if the uptick seen in the second half of 2009 is a blip, or a sign of a more positive trend.
New app developments
China Mobile will hope that its continued focus on the development of higher revenue-generating non-voice services this year will help drive ARPU in a more positive direction. It says it has a number of new services in the pipeline, such as mobile video, mobile reading, and mobile payments: The carrier's $5.8 billion investment in SPD Bank, announced only days ago, includes a service creation relationship based around the development of mobile payment and m-commerce applications. (See China Mobile Opens $5.8B Bank Account.)
China Mobile also launched its own application store, Mobile Market, in 2009, and says 32,000 developers are now working on apps for the store. The number of applications available by the end of 2009 was 8,600, and downloads had reached more than 2 million. The service is now supported on around 120 compatible devices.
A further core development area for the operator is what it describes as "The Internet of Things" -- essentially the operatorâ€™s machine-to-machine (M2M) strategy. It intends to develop M2M solutions for more than 10 sectors, including electricity supply, transport, healthcare, finance, agriculture, and logistics, on a collaborative basis.
Meanwhile, further efforts will be made this year to improve 3G coverage and increase the number of handsets available on the market. China Mobile says more than 80 TD-SCDMA handsets and almost 180 terminals will be launched on the market this year.
China Mobile still has a relatively small number of 3G users -- just 3.4 million at the end of 2009, and nearly 3.9 million at the end of January 2010.
The operator also plans to speed up development of TD-LTE, its next-generation mobile infrastructure technology f choice, through larger-scale network tests.
The development of TD-LTE is a key strategic network development for the operator as the technology will bring it more in line with global standards, since LTE will support both TDD and FDD in future.
At present, China is the main supporter of TD-LTE, but this situation could change following yesterday's announcement by Qualcomm Inc. (Nasdaq: QCOM) that it plans to bid for 2.3GHz spectrum in India's BWA (broadband wireless access) spectrum auction. If successful, the company plans to help deploy TD-LTE technology in the Indian market. (See Qualcomm Unveils LTE Plans for India.)
— Anne Morris, freelance editor, special to Light Reading