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• China Mobile was the world's leading mobile communications service provider with
over 400 million customers.
• In some cities, its penetration rate was over 100% & Chairman Wang Jianzhou was
exploring ways to expand its customer base (rural penetration rate was still just
15%)
• Nearly saturated in the cities, China Mobile needed to broaden its base of
subscribers
• Wang believed that further investment in China's rural villages was a key strategy
that would help fuel growth for the future.
• The company's participation in the government-mandated Connect Every Village
project helped it in subsequently building out the value added “Rural
Information network” through its initiatives (to make its mobile phone network
more valuable to the lifestyles of China's rural population)
• Around 2,14,000 villages were still not connected and the govt was agressively
planning network rollouts at the rate of 10% per year
•
• Risks inherent in China Mobile’s rural strategy:
– Increasing costs as coverage was extended into
remote areas
– Difficulty in developing rural infrastructure
– Customers having little cash meant that profit
margins remained thin
– The monopoly no longer remained and there was
fierce competition
– Possibility of overlooking significant opportunities
in overseas markets
–
Telecom.
Industry
Govt’s attempt to
promote
enterprise reform
through structural
changes
Telecommunications Industry
• All six operators were running profitable operations
in the next few years
• Mobile phones began to substitute residential
phones, hence fixed line carriers slowly started
loosing out
– Jan-July 2008: 10.6 million fixed line subscribers
dropped their service whereas wireless
subscriptions grew by 61 million
• Asymmetric growth as China Mobile started enjoying
advantages due to growth in mobile subscriptions
2008 Telecommunications Reform
• In 2008 a series of mergers were announced to rebalance the
industry (anticipated for over 5 years)
• The six companies were streamlined into three full service
operators
– China Mobile + China Tietong
– China Unicom + China Netcom
– China Telecom acquired China Unicom’s wireless
service(CDMA technology) & the non satellite
assets of China Satcom
• China Mobile which already had a strong position in the wireless
segment waited to respond to China Unicom & China Telecom
Chinese Wireless Industry
Number of phones per capita(Penetration rate) in cities like Beijing &
Shanghai approached 100%, while in Guangzhou it was well over 100%
However, overall market penetration stood at 41.6%, indicating plenty of
room for further development
Technology
• Cellular network Standards:
– 1G- Analog signals that linked to radio channels
– 2G- Digital signals that allowed both voice & data
transmission
– 2.5G & 3G- More efficient and rapid data & video transfer
• Adoption: China mostly used 2.5G (CDMA & GSM)
• China Unicom owned networks in both standards (first
operator to offer handsets which could switch between the
type of network)
• China Mobile’s network was based on GSM technology
• Chinese govtrefrained from issuing 3G licenses until it felt that
an indigenously developed TD-SCDMA technology was
tested to be commercially viable (China Mobile was test
marketing this in 8 cities)
Project framework
Universal service fund
– 37,741 villages to be covered
– Charged each fixed line number owned by the
company $.03
– Each company to self finance the project
– $4.22 billion total investment till now
China Mobile and USF
– China mobile got 52.8% share of the task
– Spent about RMB 7 billion in first yr. itself
– Constructed 17,769 base stations
– Provided coverage in 39,784 admin villages
China Mobile
TABLE : B
• Total voice usage
• Average minutes per user per month
• Average revenue per user per month
• Decline of ARPU due to:
– Discounting prices
– Higher number of rural consumers
Segmentation
• Since subscriber Three primary segments
acquisition costs
were high, revenue
growth was mainly 1. Go tone
driven by – High end customers
encouraging more 2. M zone
– Established in 1994
– Long distance, Data & Internet services, Mobile + Fixed
– 2007: USD 13 billion generated by its GSM & CDMA
– China opened telecom market: Unicom tasked with rolling out
Qualcomm’s CDMA standard
– Business was divided and hence suffered
– Loss of subscriber rate reached 2.04%
– Advantage: earned revenues from interconnection fees
– China mobile had to lease lines and pay these fees for calls its
customers made
–
China Mobile’s Competitors
• China Telecom
– Launched in 2009
– China Telecom + Unicorn’s CDMA network
– Focused on building up CDMA services
Success of RIN
• Wide distribution of • Operating cost was very
network terminals low
• 4,00,000 terminal already • Consumer responded
distributed very favourably to
useful content
• Differential price
packages for rural • Customer demand has
people exceeded projections
• •
Specifications
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