The China market, although large, still has low penetration rates and this is an excellent indicator for future growth. The report covers trends and developments in telecommunications, mobile, Internet, broadband, digital TV and converging media including IPTV developments. Subjects include:
- Market and industry analyses, trends and developments;
- Facts, figures and statistics;
- Industry and regulatory issues;
- Major Players, Revenues, Subscribers, ARPU;
- Internet, VoIP, IPTV;
- Mobile Voice and Data Markets;
- Broadband (FttH, DSL, cable TV, wireless);
- Convergence and Digital Media.
The Chinese telecommunications market is the largest in the world. With the mobile sector still expanding at over 18% going into 2008, the long-awaited licensing of 3G services is getting closer and will surely give the market yet another boost. There continues to be a major need for industry restructuring and government action is expected in conjunction with the issuing of 3G licences. Telecommunications development figures prominently in the nation’s priority scheme as China readies itself for the 2008 Beijing Olympics.
The Chinese telecom market is serviced by six main operators: China Telecom, China Netcom, China Mobile, China Tietong (formerly China Railcom), China Satcom and China Unicom. State agencies have been discussing possible mergers among the operators as part of the industry restructuring. In the past five years, as one of the country’s ‘pillar industry’, China’s telecom service industry has grown at a faster rate than the country’s GDP. According to official statistics from the Ministry Information of Industry, revenue from basic telecom service contributes approximately 2.1% of the country’s GDP, while value-added telecom services contribute a further 3.2% to total GDP.
By the end of 2007, mobile penetration in China stood at 41.4%, following a record level of subscriber additions during the year. The robust growth was due to an expanding rural market and the increasing number of people who have acquired more than one mobile phone. Both China Mobile and China Unicom have invested considerably in network improvements, especially in rural China, where approximately 750 million of China’s population resides and teledensity is just 12%. For many of China’s tech-savvy citizens, the mobile phone is becoming the preferred means of using the Internet. The number of people who access the Internet through their mobile phone surged to 50 million in 2007 from 17 million at the end of 2006, about a quarter of China’s Internet users.
Since the implementation of one-way charging implemented nationwide in the middle of 2007, the substitution of fixed-line services by mobile networks has accelerated. While China Mobile and China Unicom added over 86 million users, or roughly 7 million a month, the fixed-line customer base shrank by 2.3 million to around 365 million, a penetration of 27.8%. By February 2008, the number of mobile phone users reached 565 million, exceeding the fixed-line subscription base of 362 million. Looking ahead, total mobile subscriber numbers are forecast to pass 600 million in 2008, but crucially market penetration will remain below 50%, meaning the Chinese market still has a lot of untapped potential.
China became the second largest broadband market in the world after the US in 2004, after it had passed Japan earlier in that year and South Korea in 2003. Falling equipment prices, low service tariffs and strong consumer demand for services such as online gaming and file sharing have been some of the reasons behind the impressive growth of broadband. There is little doubt that China will soon pass the US to become the world’s top broadband market. According to the annual survey conducted by China Internet Network Information Centre, going into 2008, Internet users stood at 210 million, over 75% using broadband for Internet access.
- The number of China’s telecommunication users reached more than 900 million in 2007, including around 365 million fixed lines and 545 million mobile users. This makes it the first country in the world to do so.
- Against a background of rising consumer prices in 2007, telecommunication charges fell 13.6% year-on-year.
- By end-2007, close to 75% of China’s 210 million Internet users were from urban areas. Urban subscribers reached 157 million representing an urban penetration rate of 27.3%. This was well above rural subscribers of 52.6 million giving a rural penetration rate of 7.5%. Over the next five years, it is estimated that the number of Internet users in China will grow at a compounded annual rate of 18.5%, while the US will grow at only 2.2%. By 2012, that would give China 590 million Internet users. Going into 2008, China had about a 16% Internet penetration rate compared with the world standard 19.1% and the US’s 69.7%.
- The rise in broadband lines to over 66 million was accompanied by a significant fall in the cost of Internet connections. The average connection cost fell to less than 75 yuan per month at the end of 2007, however a World Bank report released in May 2007 highlights that this is more than 10% of the Chinese average monthly income. In developed countries people spend an average of less than 1% of their income to access the same information online.
- China Internet consumption in 2007 was 398.8 billion yuan and is expected to grow 45.8% in 2008. Online shopping reached US$8.2 billion, up more than 90% from 2006. Of China’s 210 million Internet users, 55 million shopped online in 2007. Online sales, which accounted for less than 1% of China’s total retail sales, are forecast to make up 5-8% of total retail sales by 2012. Sales of online games in China topped US$1.45 billion in 2007, up 61.5%. It is estimated that China’s online gaming population will hit 84.56 million by 2012 from 40 million in 2007.
- The transaction volume of China’s online business-to-business jumped 65.9% year on year to 2.1 trillion yuan (US$292 billion) in 2007. Revenues drawn from online B2B operations are expected to jump to 13.8 billion yuan (US$1.8 billion) in 2011 from 76 billion yuan (US$10.6 billion) in 2002.
- China’s online advertising market revenue reached US$1.3 billion in 2007, while US Internet advertising spending reached around US$21.4 billion in the same period. The Internet makes up only about 5% of advertising spending in China compared with 10% in the US.
- By end-2007, China Netcom and China Telecom between them, had over 1.2 million IPTV subscribers. Shanghai had 300,000 IPTV subscribers by March 2008, the highest in the country.
- By early 2008, 68 cities had completed digital cable TV conversion, with the penetration rate of digital cable TV reaching 24.33%.
- Early in 2007 China ramped up the number of cities trialling its home grown 3G standard, TD-SCDMA, to 10. After initial reports in May 2007 that China was expected to invest at least RMB4 billion (US$519 million) buying TD-SCDMA handsets, in early 2008 China Mobile started selling heavily subsidised TD-SCDMA phones in eight cities. Officially it is a trial, because 3G licences have not yet been issued. According to the International Olympic Committee, the inability to offer a widely-supported 3G network was the only infrastructure target that Beijing failed to meet.
- The calling-party-pays billing policy for mobile phones, under discussion from before 2001, was finally implemented during 2007.
Internet, broadband, IP telephony and telecoms statistics for China - 2004 - 2007
Sector 2004 2005 2006 2007
Internet users (million) 94 111 137 210
Annual Growth 18.2% 18.1% 23.4% 53.3%
Internet subscribers (million) 71.7 73.2 79.5 87.4
Number of Chinese websites (million) 0.67 0.69 0.84 1.5
Broadband (million subscribers)
DSL 16.9 26.3 36.9 52.0
Total 25.8 37.5 51.8 66.4
Subscribers to Telecoms Services (million)
Subscriber fixed-line telephones 311.7 350.4 367.8 365.4
Penetration 24% 26.9% 27.9% 27.7%
Mobile phones 317.2 393.4 461.1 547.3
Penetration 24.4% 30.2% 34.9% 41.4%
(Source: BuddeComm based on MII, Global Mobile, Point Topic and CNNIC data)
For those needing high level strategic analysis and objective analysis on China, this report is essential reading and gives further information on:
- A reform plan presented to the National People’s Congress in March 2008 for the MII to be given an expanded industry development role in a revamp of China’s central bureaucracy. Under the plan, the MII will be one of five new ‘super-ministries’ under the new shake-up, downsizing the number of top-level agencies from 28 to 27.
- Continued crackdown by authorities on porn sites until after the Olympics. In 2007, 44,000 porn sites were shut down and over 800 people were arrested. Illegal websites, computer markets and Internet cafes are also targeted as part of a campaign to rein in juvenile crime.
- The settlement between Yahoo! and the families of two imprisoned Chinese journalists serving 10-year prison sentences for engaging in pro-democracy efforts that the country’s authorities deemed subversive. The move enabled Yahoo! to escape the courtroom. Yahoo! had helped the investigation by providing China’s authorities with personal information culled from the email accounts and other online activities of the journalists.
- China Mobile’s first move overseas with its acquisition of Pakistani mobile operator Paktel.
- Clearance for RIM to sell BlackBerry devices in China after eight years of trying. RIM’s move into China comes as it competes in the US with Apple’s heavily hyped iPhone, which is not yet selling in China.
- Fresh legal action launched by Universal, Sony BMG and Warner in early 2008 against Baidu for allegedly pirating music files. The three companies, which lost a related ruling in December 2007, filed a case with fresh claims against Chinese Internet portal Sohu.com and its search engine, Sogou. Yahoo China also faces proceedings after refusing to comply with a December 2007 ruling by the Beijing Higher People’s Court, which confirmed that the company violated Chinese law by committing mass copyright infringement.
- The merger between China Satcom and two other state-owned satellite firms Sinosat and China Orient Satellite. The late 2007 planned launch of Chinasat 9 was delayed. The satellite was meant to operate in tandem with Sinosat-2, the country’s first direct broadcast television satellite, but Sinosat-2 failed after its initial launch.