Developing Telecoms | 3G forecast looks rosy in China

17 May 2012

Regional Trends

LATEST NEWS:

Thai operator secures wireless distribution agreement Financial services project reaching out to millions of Africans Fibre investment on the way in Algeria Android tablets gaining popularity in Southeast Asia Bharti seeking JV takeover as profits slide Solar-powered learning initiative takes off in Uganda GSMA voices criticism of Indian licensing proposals Enhanced mobile broadband deploying across three Baltic countries Market developments lay the foundation for future growth in Iraq India Feels More Shockwaves from the So-called ‘2G Scandal' Overpriced broadband faces fibre challenge in Angola First commercial 4G services go live in Croatia VimpelCom sells Vietnamese assets TRAI advocates new operators entering 2G auctions Romania’s first MVNE launching imminently Indian tax change could provoke legal action from Vodafone Mobile growth slows in Iran as penetration reaches saturation point Thailand close to finalising 3G auction process Internet Exchange Points Spur Internet Growth in Emerging Markets Incoming fibre boosts investment prospects for Burundi 3G on the way in Djibouti, but competition is required Saudi incumbent looks abroad amidst heated domestic competition Orascom serves Algerian government with arbitration notice Kenya’s mobile sector recovering from slump Download deal aims at attracting Indian Android users Bangladesh set for mobile & internet growth as Indian relations improve Android takes the lead in China by doubling market share Liberalisation driving growth for Bahrain’s broadband Partnership agreement drives roaming costs down across nine African countri... Indian 2G licence cancellations affirmed by Supreme Court TeliaSonera in talks over MegaFon’s future HSPA+ upgrade for Thailand’s state operator Growth set to continue in the Philippines despite looming saturation

3G forecast looks rosy in China

Friday, 20 January 2012 12:55 | James Barton

Attention: open in a new window.

As one of the largest growth markets in the world, it is unsurprising that forecasts for China’s telecoms sector are being revised upwards, according to BMI. With the number of fixed-line subscribers in 2011 predicted at 286m – up from previous forecasts of 273m – and 3G subscriptions expected to soar from 111m in 2011 to 773m in 2016, it seems that the market is far from saturation point.

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, operators have yet to reap the rewards as network expansion and marketing costs weigh heavily on their profitability. Nevertheless, 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 its core macroeconomic and financial market views playing out. With real GDP growth at its lowest level since 2009 in Q311 at 9.1%, 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.

Tags: