1、CONFIDENTIALChinas Mobile Telecom ServicesIndustry OverviewGCO Practice DevelopmentACKNOWLEDGEMENTS AND REFERENCESMGMs and CSS involved in the relevant studies include the following:TonyPerkins(BEI)StefanAlbrecht(BEI)ChipperBoulas(HKO)PeterKenevan(TOK)PerchowJosephChang(SHA)AndrewWu(HKO)HaiWu(BEI)Ja
2、neXing(HK)YiFeng(BEI)ShengFLi(SHA)YoshinobuTakanuki(TOK)GraemeHunter(JOH)JuliaYang(BEI)EricXu(BEI)JasonLiu(BEI)ShirleyChen(BEI)The series of PDs include the following:#ChinaMacroeconomicEnvironment#ChinasMobileTelecomServiceIndustryOverview#ChinasInternetIndustryOverview#ChinaTelecomEquipmentandServ
3、icesOverview#ChinasMobileHandsetSectorOverview#ChinaTelecomIndustryRegulatoryOverview#KeySuccessFactorsandCaseStudiesofMNCsEntrytoChina202PDChinaMobileTelecomsServiceIndustry020403.pptKEY MESSAGES1.Chinasmobiletelecomservicemarketishugeandfastgrowing,representingUS$21billionmarketsizein2001andUS$38b
4、illionin2005.Thismarketissupportedbytheworldslargestsubscriberbaseat145million,alreadycomprising15%oftheworldstotalin2001andgrowingtopotentially218millioninalowcaseor300millioninahighcaseby20052.ThecompetitivelandscapeformobileserviceshasevolvedfromasingleregulatorandoperatortotodaysduopolyofChinaUn
5、icomandChinaMobile,bothofwhomareunassociatedwiththeMinistryofInformationIndustries.AsecondbreakupofChinaTelecomisexpectedtoformtwolargetelecomoperators,ChinaTelecomandChinaNetcomGroup,whoarelikelytoreceivemobilelicenses.Afifthtelecomoperator,ChinaRailcom,alsohasthepotentialofreceivingathirdgeneratio
6、nlicenseandbuildingamobilebusiness.Fornow,ChinaMobiledominatesthemarketwith82%valueshareand72%subscribershareandownsmuchofthehighvalueuserbase.Howeverchurnisalreadyhighandisexpectedtoincreasewithcontinuingpricingpressuresandincreasedcompetition.3.WirelessdataservicesareexpectedtogrowquicklyinChinato
7、amarketofpotentiallyoverUS$4billionby2005,usedby43%ofallmobileusers.Interestfromconsumersurveyshavebeenhighandoperatorsandotherplayersareactivelybuildingservicesinthemarket.WhileearlyWAPserviceshavefailedtocatchon,SMShasgrownexponentiallywithupto20billionSMSmessagesin2001.Theearlyadopterswillbemobil
8、eprofessionalsandmodernyouth,whowillrequireservicesanddevicestailoredtotheirneeds.4.Regulatorychangesloom,particularlywiththeaccessionofChinatotheWTO.WhileforeignerswillbeunlikelytosetupMVNOs,WTOwillallowgreaterparticipationofforeignersinbasicandvalueaddedservices,althoughgeographiclimitationswillex
9、istthrough2004andChineseplayerswillberequiredtoownatleast50%oftelecomserviceventures(51%forbasicservices).Regulatoryrisksremain,withnomeanstoappealregulatordecisions,unclearinterpretationofregulationincludingWTOcommitments,andthegovernmentstrackrecordofintransparentandunpredictabledecisionmaking.(Se
10、eseparateregulatoryPDfordetails)Appendix Playersprofiles 3Gtechnologystandardschoices302PDChinaMobileTelecomsServiceIndustry020403.pptKEY MESSAGES1. Chinas mobile telecom service market is huge and fast growing, representing US$21 billion market size in 2001 and US$38 billion in 2005. This market is
11、 supported by the worlds largest subscriber base at 145 million, already comprising 15% of the worlds total in 2001 and growing to potentially 218 million in a low case or 300 million in a high case by 2005402PDChinaMobileTelecomsServiceIndustry020403.ppt1997-2001 MOBILE SERVICE REVENUE GROWTH OF 30
12、% CAGR HAS OUTPACED OTHER TELECOM SERVICE SECTORS AND IS PROJECTED AT 16% THROUGH 2005RevenuesUS$BillionsCAGR vs. other industries (1997-2001)PercentMobileFixedlinePagingCAGR30%CAGR16%Source:DeutscheBank;McKinseyanalysis502PDChinaMobileTelecomsServiceIndustry020403.ppt*Revenuesdonotequaltheproductof
13、ARPUassubscriberfiguresareprovidedforyearend,notaveragesubscribersduringayear.Detailedinformationonthetimingofnewsubscriptionsandchurnrequiredforthecalculationofaveragesubscribersduringagivenyearisnotavailable*AllCAGRsarecalculatedontheannounceddataSource:DeutscheBank;JPMorgan;MIIEXTRAORDINARY SUBSC
14、RIBER GROWTH IS THE PRIMARY DRIVER OF REVENUE EVOLUTION, MORE THAN MAKING UP FOR LARGE DECLINES IN ARPU DUE TO STIFF COMPETITIONMobile revenues* $BillionsNumber of subscribers low case MillionsCAGR 30%CAGR 16%CAGR 83%ARPUUS$/monthCAGR -24%CAGR -7%PenetrationinitiallylowGovernmentbackingforincreasing
15、subscribernumbersRelativelylowfixedlinepenetrationLow-endprepaidsubscriberincreaseDrivers DeclineduetoincreasedprepaidandlowerspendingbylateentrantsTariffreductionascompetitionincreasesSlightlyoff-setbyincreaseindatatrafficinlateryearsCAGR 19%20823526329117161515AnnouncedEffective602PDChinaMobileTel
16、ecomsServiceIndustry020403.ppt*05forecastuselowcase,netsubsafterinactiveandmulti-sim-cardreduction*MajorEuropeancountriesinclude:UK,France,Italy,Germany,Netherlands,Spain,SwedenSource:JPMorgan;WEFA-WMM;MII;McKinseyanalysisJapanCHINA IS THE WORLDS LARGEST MARKET IN TERMS OF SUBSCRIBERS, HAVING OVERTA
17、KEN THE US IN 2001USMajorEuropean*countriesCAGR = 30%CAGR = 14%CAGR = 7%Number of mobile subscribersMillionsCAGR = 13%20002005Chinalowcase*Chinahighcase*CAGR = 22%702PDChinaMobileTelecomsServiceIndustry020403.pptCHINAS MOBILE SUBSCRIBER BASE IS GROWING MORE RAPIDLY THAN ANY OTHER MAJOR MARKET, COMPR
18、ISING 15% OF WORLD TOTAL IN 2001*Afirca,EasternEurope,MiddleEast,Canada*Forecastof02-05usethehighcase,netsubsafterinactiveandmulti-sim-cardreductionSource:JPMorgan;Gartner2001;DeutscheBank;MerrillLynch;PiperJaffray19971998199920002001E2073004827279651,1781,3931,633100%=Global mobile subscribersMilli
19、onsubscribers;percentWesternEuropeUSSouthandLatinJapanandAsiaPacificChina*Restofworld*CAGR1997-2005percent2918452847452002E2003E2004E2005E1,850802PDChinaMobileTelecomsServiceIndustry020403.pptCHINAS MOBILE MARKET IS PROJECTED TO GROW SIGNIFICANTLY*02-05forecastarenetsubsafterinactiveandmulti-sim-car
20、dreductionSource:IDCreport;JPMorganreport;McKinseyanalysisNet subscriber* additionsMillions199719981999200020012002E2003E2004E2005E10847133-98-4711Annual growth Percent1237912131516PenetrationPercent47.143.946.345.75.511.516.939.435.9LowcaseHighcaseLow10847103-9225-13HighLowHigh1237912161923902PDChi
21、naMobileTelecomsServiceIndustry020403.ppt0%5%10%15%20%25%CHINAS SUBSCRIBER BASE OF 218 MILLION IMPLIES A 47% PENETRATION OF AN ADDRESSABLE MARKET OF 460 MILLION BY 2005*Lowcase,netsubsafterinactiveandmulti-sim-cardreductionSource:JPMorgan;DRI;A;Literaturesearch;Analystreports;TeamanalysisIncome per
22、capita(US$p.a.)2001AddressablemarketNumberofmobilesubscribersImpliedpenetrationoftheaddressablemarket2005E345mn145mn42%463mn218mn*47%China income distribution and addressable marketPercent1,8151,77220012005 Chinasaddressablepopulationformobileservicesisprojectedtoincreaseby8%p.a.forthenextfiveyearst
23、o460millionin2005 Thekeyassumptionsindeterminingtheincomethresholdare: Chineseconsumerswillingtospend5-10%oftheirincomeoncommunicationserviceshigherthantheaverageof3.5-4%formoredevelopedmarketsasagreaterportionofincomeisavailablefornon-essentialgoodsasaresultofChinasrelativelylowlivingcost Halfofthi
24、sassumedspentonmobileservices(5.5%) UnicomsprepaidARPUwilldecreasefromUSD8.3for2001toUSD8.1for2005;thereforethethresholdincomewilldropfromUSD1,815(8.3*12/5.5%)for2001toUSD1,772for2005(8.1*12/5.5%)2005Addressablemarket:35%Addressablepopulation:460mnpersons2001 Addressablemarket:27%Addressablepopulati
25、on:345mnpersonsPercent of population1002PDChinaMobileTelecomsServiceIndustry020403.pptMOBILE SUBSCRIBER PENETRATION OF LESS THAN 7% IN 2000, LEAVES SIGNIFICANT ROOM FOR GROWTHSource:JPMorgan;IDCreport;Gartner;Literaturesearch,EIU100%199619971998199920002001E 2002E 2003E2004E 2005EMobile subscriber p
26、enetration in 2000PercentItalySwedenNetherlandsUKSpainGermanyFranceUSChina*AllsubscribersDataservicesubscribers1,2181,2301,2421,2541,2651,2761,2871,2981,3091,319As percentage of total population low case*Millions(totalpopulation)ChinaUrban*02-05forecastarenetsubsafterinactiveandmulti-sim-cardreducti
27、on*Penetrationovertotalpopulation*Penetrationoverurbanpopulation.0.61.01.92.96.68.91.12.03.97.10.412.013.415.016.41102PDChinaMobileTelecomsServiceIndustry020403.pptCHINAS RICHER PROVINCES GENERALLY HAVE MORE SUSCRIBERS AND ARE GREATER PENETRATEDPopulationMillionsPenetrationPercent,2000Subscriber CAG
28、RPercent,1998-2000Number of subscribersMillionsProvinceGuangdongLiaoningZhejiangJiangsuShandongFujianHeilongjiangShanghaiHebeiSichuanBeijingHenanAnhuiHubeiHunanSource:ChinaStatisticalyearbook,JPMorganReport,McKinseyanalysis1202PDChinaMobileTelecomsServiceIndustry020403.pptWHILE THE POOR WESTERN AND
29、INTERIOR PROVINCES HAVE LESS SUBSCRIBERS AND ARE LESS PENETRATED*Growthratefrom1999-2000Source:ChinaStatisticalyearbook,JPMorganReport,McKinseyanalysisPopulationMillionsPenetrationPercent,2000Subscriber CAGRPercent,1998-2000Number of subscribersMillionsProvinceJilinGuangxiYunnanShaanxiChongqingShanx
30、iTianjinInnerMongoliaJiangxiGansuXinjiangHainanNingxiaQinghaiTibetGuizhou1302PDChinaMobileTelecomsServiceIndustry020403.pptKEY MESSAGES2.The competitive landscape for mobile services has evolved from a single regulator and operator to todays duopoly of China Unicom and China Mobile, both of whom are
31、 unassociated with the Ministry of Information Industries. A second breakup of China Telecom is expected to form two large telecom operators, China Telecom and China Netcom Group, who are likely to receive mobile licenses. A fifth telecom operator, China Railcom, also has the potential of receiving
32、a third generation license and building a mobile business. For now, China Mobile dominates the market with 82% value share and 72% subscriber share and owns much of the high value user base. However churn is already high and is expected to increase with continuing pricing pressures and increased com
33、petition.1402PDChinaMobileTelecomsServiceIndustry020403.pptCHINAS MOBILE OPERATOR LANDSCAPE HAS EVOLVED SIGNIFICANTLY, CULMINATING IN SECOND BREAKUP OF CHINA TELECOMNomobilelicensescurrentlySource:Literaturesearch;EIUPyramid;IndustryreportsChinaTelecomChinaUnicomBecamethesecondmobilenetworkoperatori
34、nmid1994However,ChinaTelecomasthesoleproviderofbothbasicandwirelesstelephonyservicesmadeitdifficultforUnicomtogrowChinaUnicomChinaRailcomChinaUnicomMinistryofPostsandTelecommunicationsCreatedin1994whenformerMPTseparatedintoregulatoryandoperatingfunctionsChinaTelecomownershiptransferredtoMinistryofFi
35、nance,withregulatoryfunctionsplacedinthenewMinistryofInformationIndustries(MII)ChinaTelecomChinaMobile(CMCC)ChinaTelecomChinaMobile(CMCC)Underthegovernmentsanti-monopolyplan,inthe1sthalfof1999,ChinaTelecomwassplitinto4operatingcompanies:CTfixed,ChinaMobile,CTPaging,CTSatelliteThechangebecameofficial
36、onApril20,2000Priorto1994,theMPTactedastheregulatorandsoleoperatoroftelecommunicationsIn1993,announcementwasmadetoseparateoperatingandregulatoryfunctionsalongwiththeestablishmentofa2ndoperatorGreatWallEstablishedin1995toharnessPLAsradiospectrumThecompanyundertakes“theCDMAproject”atthedirectionoftheg
37、overnmentGreatWallDuetogovernmentcommitmenttoseparatePLAfromcommercialactivities,GreatWalldissolvedwithdecisiontotransferCDMAassetstoChinaUnicommadeinOctober2000(transferyettobecompleted)2ndlargestfixedlinenetworkEstablishedDecember2000OfferslimitedGSMserviceoveritsrailwaynetworkPre 1994 Regulator a
38、nd Operator1994 to 1999Virtual Monopoly1999 To 2002 Deregulation/Breakup2002 and beyond 2nd breakupand future landscapeChinaNetcomEstablishedinSept.1999withinternetbackboneLikelylicensewinnerJitongJitongSetupin1994todevelopdatacommunicationserviceBegantoofferVoIPservicesLeadingplayerinvoiceoverIPChi
39、naNetcomGroupChinaRailcomChinaTelecombrokenupintoNorthandSouthwithCTNorthmergingwithChinaNetcomandJitongtobecomeChinaNetcomGroupChinaTelecomSouthcontinuesoperationasChinaTelecomOperatingCDMAlocalloopservicesinseveralcitiesChinaMobileunaffectedbysecondbreakup,survivingproposaltomergeitwithJitong,give
40、nconcernsaboutconsequencesofforcedmergersforpubliclylistedcompaniesChinaUnicomunaffectedbysecondbreakup,survivingproposaltomergeitwithRailcomWhileGreatWallCDMAassettransferhasyettobecompleted,UnicomwillbecomefirstmajoroperatorintheworldwithbothCDMAandGSMservices,withlaunchofitsownCDMAnetworkin2002Op
41、eratorbiddingfor3Glicense,withopennesstowardsadoptingChinas3Gstandard,TD-SCDMA1502PDChinaMobileTelecomsServiceIndustry020403.pptSource:Literaturesearch;industryinterviewsBeforeAfter CT break-upMOST RECENT BREAK-UP OF CHINA TELECOM TO LEAD TO A LANDSCAPE OF 5 OPERATORS COMPETING ACROSS BOTH MOBILE AN
42、D FIXEDLicensesLicensesAnnouncementonNovember26tomergeJitongwithChinaNetcomandChinaTelecomNorthernunitCompetitionwillincreaseasmergedtelecomgiantsobtainlicensesforcomprehensivetelecomoperations,including Fixed-linephone Mobilephone Internet-relatedservicesOriginalplantomergeChinaMobilewithJitongandC
43、hinaUnicomwithChinaRailcom,metwithstrongdissentfromthecapitalmarketswhosawthisasanaffronttoChinaMobileandChinaUnicomsgovernanceaspubliclyheldcompaniesMobileMobileFixedMobile(GSM-R)FixedFixedFixedFixedGROUPChina Telecom NorthChina Telecom SouthMobileFixedMobileFixedMobileFixedMobileFixedChina Railcom
44、China RailcomMobileFixedHavelicense1602PDChinaMobileTelecomsServiceIndustry020403.pptPROFILES OF CURRENT AND LIKELY FUTURE PLAYERSChina assetsMobile strategyCurrent partnershipsLicense prospects*Stilltobedecided96millionmobilesubscribers30millionmobilesubscribersServicescoveringover180citiesLargestn
45、ationaltelecomnetworkcovering2,000citiesFirstoperatortointroduceinternetaccesscards,andannouncedon-lineshoppingcardtobelaunchedin2001Internetbackbonecovering17majorcitiesStartedIPphoneservicesinJanuary20002ndlargestnetworkinChina;coveringallmajorcities(500cities)Betechnologyleader,thuseagertoenter3G
46、Focusonhigh-endcustomersTrialingGPRSwith7vendorsStronglysupportingWAPShiftingattitudesontechnology,nowfirstplayertocoverbothGSMandCDMAFocusingattentionondevelopingCDMAnetworksTrialingGPRSwith4vendorsCompeteonserviceofferingwithexistingoperators,leveraginggovernmentandsupplierexpertiseActivewithWLLan
47、dlocalmobilityGostraightto3GifpossibleObtainmobilelicenseasquickaspossibleregardlessoftechnologystandardRolloutwirelessdataservicesevenifitmeanstakingGSM/GPRSfirstMayfocusinitiallyonGZ,BJ,SHLikelyintendsfollowing2-tierstructure Obtain3Glicensetotargethigh-endusers Use2GPHStotargetvoicesubscribersVod
48、afoneHPHutchisonKDDISKTelecomTelstraAT&TJapanTelecomBritishTelecomNewsCorporationGoldmanSachsSingTelNoneExistingExistingCurrent playersChina MobileChina UnicomLikely future playersChina TelecomChina NetcomChina Railcom*Governmentlikelytogrant2licenses;undecidedwhen,andwhattype;nonetobeawardedin2001S
49、ource:PiperJaffrey;MerrillLynch;Literaturesearch1702PDChinaMobileTelecomsServiceIndustry020403.pptOTHER PLAYERS UNLIKELY TO ATTAIN MOBILE LICENSESSource:GoldmanSachs;EIUPyramid;McKinseyanalysisCentury MobileJitongForeign JV EntrantsNew telcosWho they areBasis for entryObstaclesConsortiumof10enterpri
50、seswhohavejoinedtogethertotrytosetupmobileenterpriseSetupin1994todevelopdatacommunicationservicesPotentialJVsinvolvingforeigncompaniesNewplayersexpandingintotelecomSomegovernmentcontactsOriginallyconsideredtakeoverofGreatWallsassetsOwns70%ofVoIPmarketGovernmenthasindicateddesiretoseemultipleoperatio
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