We made modest forecast adjustments in Q217 but retain a generally positive outlook for theChinese telecommunications market. The ICT sector is integral to China's 13th five-year plan (2016-2020)and will stimulate growth in other industries. While the plan lays out ambitious broadband targets,profitability in the telecoms sector will be largely undermined by the state-owned operators' need tocompress prices to meet them. On the other hand, local IT and consumer electronics companies will gainfrom a higher budget for R&D (2.1% of GDP to 2.5%) and reduced reliance on imports for high-techinputs. Operator strategies will continue to chime with the government's directive to drive uptake ofwireline broadband and machine-to-machine (M2M) connections. As the prices of basic services will becompressed, operators will derive profit growth by developing and bundling value-added services withbasic connectivity.
Latest Updates And Industry Developments
The Chinese mobile market lost over 20.0mn subscribers in Q116, posting strong negative growth in itsfirst quarter of declines. The market recovered well, adding over 37.6mn subscribers in the last ninemonths of 2016 and an additional 16.5mn subscribers in Q117 alone, suggesting organic growthpotential.