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2008 Asia - Telecoms, Mobile and Broadband in China

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;
  • Infrastructure;
  • 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.

Key highlights:

  • 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
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.

1. Key Statistics
2. Telecommunications Market
2.1 Overview of China’s telecom market
2.2 Fixed-lines and mobiles
2.2.1 Fixed-Mobile Convergence (FMC)
2.3 Television broadcasting
2.4 Direct undersea cable link to USA
2.5 China-Vietnam undersea cable link
2.6 Tenth Five Year Plan (2000-2005)
2.6.1 Budget for Information and Communications Technology (ICT)
2.7 Eleventh Five-Year Plan (2006-2010)
2.8 Preparations for the 2008 Beijing Summer Olympics
2.9 Market highlights
2.9.1 Year 2007
2.9.2 Year 2006
2.9.3 Year 2005
2.9.4 Year 2004
2.9.5 Year 2003
3. Regulatory Environment
3.1 Overview
3.2 The regulator - Ministry of Information Industry (MII)
3.2.1 State Standardization Administration
3.2.2 State Telecommunications Management Commission
3.2.3 MII expansion
3.3 Competition
3.4 Liberalisation
3.4.1 Qualified Foreign Institutional Investor (QFII)
3.5 Restructuring of telecommunications operators in China
3.5.1 Break up of China Telecom
3.6 WTO accession
3.6.1 Final concessions
3.6.2 Foreign investment after WTO accession
3.6.3 Initial impact
3.7 Telecom regulatory legislation
3.7.1 Role of the MII
3.7.2 Operators
3.7.3 Foreign participation
3.7.4 Private Bank Exchange (PBX) operators
3.7.5 Service quality and universal service
3.7.6 Service charges
3.7.7 Other issues
3.8 Tariffs
3.9 Calling-Party-Pays (CPP)
3.10 Service quality
3.11 Telecom equipment market regulations
3.11.1 Telecom equipment Network Access Licence (NAL)
3.12 Reorganisation of fee structures
3.13 Yearly summaries of major regulatory developments
3.13.1 Year 2008
3.13.2 Year 2007
3.13.3 Year 2006
3.13.4 Year 2005
3.13.5 Year 2004
3.13.6 Year 2003
4. Major Operators in China
4.1 Overview of major players
4.1.1 Analysis - business restructuring in China - January 2007
4.1.2 Analysis - China’s telecoms industry restructuring - April 2007
4.1.3 Analysis - China’s telecoms industry restructuring - January 2008
4.1.4 Analysis - China’s telecoms industry restructuring - March 2008
4.1.5 Timetable for China’s telephone users
4.1.6 Snow storms damage operator infrastructure
4.2 China Mobile Ltd
4.2.1 Company overview
4.2.2 Financial and operating highlights - Annual Report 2007
4.2.3 Recent developments
4.3 China Netcom
4.3.1 Company overview
4.3.2 Financial and operating highlights - Annual Report 2007
4.3.3 Recent developments
4.4 China Satcom
4.4.1 Company overview
4.5 China Telecom
4.5.1 Company overview
4.5.2 Financial and operating highlights - Annual Report 2007
4.6 China Tietong
4.7 China Unicom
4.7.1 Company overview
4.7.2 Financial and operating highlights - Annual Report 2007
4.7.3 Recent developments
5. Telecommunications Infrastructure
5.1 Overview of infrastructure developments in China
5.1.1 Official condemnation of redundant network construction
5.1.2 Analysis - China’s telcos need structural separation - January 2007
5.2 National telecom networks
5.2.1 Backbone Internet networks
5.3 International infrastructure
5.3.1 Submarine cable infrastructure
5.3.2 Satellite infrastructure
5.4 Fibre-to-the-Home (FttH)
5.4.1 Market overview
5.4.2 Gigabit Ethernet/FTTx+LAN
5.5 Broadband over Powerline (BPL)/Powerline Communications (PLC)
5.6 Next Generation Networks (NGNs)
5.6.1 World’s largest NGN in the works
5.6.2 China Railway fibre network
5.6.3 High-speed network technologies
5.6.4 Data and Multi-Media Communications Network
5.7 IP-Virtual Private Network (IP-VPN)
5.7.1 Growth of IP-VPN in China
5.7.2 Peer-to-Peer (P2P) streaming
5.7.3 International Ethernet Private Line (IEPL)
5.8 IP telephony/ VoIP
5.8.1 Market overview
5.8.2 Major VoIP networks
5.9 Telecoms & IT
5.9.1 Data communications
6. Broadband and Internet Market
6.1 Broadband market
6.1.1 Overview
6.1.2 Broadband statistics
6.1.3 Broadband forecasts
6.2 Broadband networks
6.2.1 Overview
6.2.2 Cable modems
6.2.3 Digital Subscriber Line (DSL)
6.2.4 Fibre-to-the-Home (FttH)
6.2.5 Broadband over Powerline (BPL)
6.2.6 Wireless broadband
6.3 Major broadband service providers
6.3.1 China Telecom
6.3.2 China Netcom
6.3.3 China Tietong
6.3.4 Other broadband providers
6.4 Internet market
6.4.1 Overview
6.4.2 Internet statistics
6.4.3 E-services
6.4.4 Internet regulations and censorship
7. Convergence
7.1 Overview of media convergence
7.2 Triple play models
7.3 Digital TV
7.3.1 Broadband TV
7.3.2 Digital cable TV
7.3.3 Satellite TV
7.3.4 Digital Terrestrial TV (DTTV)
7.3.5 Interactive TV (iTV)
8. Mobile Communications
8.1 Overview of China’s mobile market
8.1.1 Mobile Internet
8.1.2 Analysis - prevalence of mobile phones in China’s city centres
8.1.3 Mobile statistics
8.2 Regulatory issues
8.2.1 Price wars
8.2.2 Subscriber registration
8.2.3 Calling Party Pays (CPP)
8.2.4 Share listing
8.2.5 Open information
8.2.6 Manufacturing quality
8.2.7 Mobile multimedia alliance
8.3 Mobile technologies
8.3.1 GSM
8.3.2 CDMA
8.3.3 PAS/PHS
8.3.4 Third Generation (3G) mobile
8.3.5 BuddeComm analyses
8.3.6 TD-SCDMA
8.3.7 WCDMA
8.3.8 CDMA2000
8.3.9 Fourth Generation (4G) mobile
8.3.10 WiMAX
8.4 Mobile handset market
8.4.1 Overview
8.5 Major mobile operators
8.5.1 Overview
8.5.2 China Mobile
8.5.3 China Unicom
8.5.4 Other mobile operators
8.6 Mobile voice services
8.6.1 Prepaid cards (SIM and PIM cards)
8.6.2 Satellite mobile
8.7 Mobile data services
8.7.1 Market overview
8.7.2 Regulatory issues
8.7.3 Satellite Terrestrial Interactive Multi-service Infrastructure (STiMi) platform
8.7.4 Short Message Service (SMS)
8.7.5 Multimedia Messaging Service (MMS)
8.7.6 Wireless Application Protocol (WAP)
8.7.7 General Packet Radio Service (GPRS)
8.7.8 Push-to-Talk (PTT)
8.7.9 Enhanced Data for GSM Evolution (EDGE)
8.7.10 Broadband wireless data services
8.7.11 BlackBerry
8.7.12 Mobile TV
8.8 Mobile applications
8.8.1 Market overview
8.8.2 A Surge in new applications development
8.8.3 Global positioning systems (GPS)
8.8.4 M-commerce
8.8.5 Mobile Video-on-Demand (VoD)
8.8.6 Mobile gaming
8.8.7 Instant Message (IM) search services
8.8.8 Ringtones
8.8.9 Mobile music
8.8.10 Push email
9. Glossary of Abbreviations
List of Tables and Exhibites
Table 1 - Country statistics China - 2007
Table 2 - Telecom revenue and investment statistics - 2007
Table 3 - Telephone network statistics - February 2008
Table 4 - Internet user statistics - February 2008
Table 5 - Broadband statistics - February 2008
Table 6 - Mobile statistics - February 2008
Table 7 - National telecommunications authorities
Table 8 - Fixed-line and mobile subscriptions and penetration - 1998 - 2008
Table 9 - China’s telephone subscribers - 1998 - 2007
Table 10 - China Mobile subscribers, annual change, ARPU, prepaid & market share - 1997 - 2007
Table 11 - China Mobile prepaid/postpaid subscribers, MoU and ARPU - 1999 - 2007
Table 12 - China Mobile revenue, EBITDA, CAPEX, net profit - 2000 - 2007
Table 13 - China Netcom subscribers by service and ARPU - 2003 - 2007
Table 14 - China Netcom revenue, EBITDA, CAPEX, net profit - 2003 - 2007
Table 15 - China Telecom key operating statistics - 2004 - 2007
Table 16 - China Telecom revenue, EBITDA, CAPEX, net profit - 2001 - 2007
Table 17 - China Unicom GSM and CDMA mobile subscribers - 2002 - 2007
Table 18 - China Unicom outgoing international and long-distance calls - 2000 - 2007
Table 19 - China Unicom revenue, EBITDA, CAPEX, net profit and EPS - 2001 - 2006
Table 20 - Network distribution of bandwidth - 2003 - 2007
Table 21 - Registered Tom-Skype users in China - 2005 - 2007
Table 22 - China Unicom international long-distance telephony: PSTN versus VoIP traffic - 2003 - 2007
Table 23 - China Netcom long-distance telephony: PSTN versus VoIP traffic - 2003 - 2007
Table 24 - Public data and multimedia users - 1998 - 2000; 2005; 2010
Table 25 - Broadband subscribers and annual change - 2000 - 2008
Table 26 - Broadband subscribers by access type and annual change - 2007
Table 27 - Broadband subscribers and households - February 2008
Table 28 - China Telecom broadband subscribers and annual change - 2003 - 2008
Table 29 - China Netcom broadband subscribers and annual change - 2003 - 2008
Table 30 - Cable modem Internet subscribers and annual change - 2000 - 2007
Table 31 - DSL subscribers and annual change - 2000 - 2007
Table 32 - China Telecom DSL subscribers and annual change - 2003 - 2007
Table 33 - China Netcom Broadband revenue - 2003 - 2006
Table 34 - CNNIC Internet statistical survey - January 2008
Table 35 - Internet users and annual change - 1996 - 2007
Table 36 - Internet subscribers and annual change - 1996 - 2007
Table 37 - Growth of websites in China and annual change - 2002 - 2007
Table 38 - Website classification and Domain Names - January 2008
Table 39 - Registered .cn domain names by code - January 2008
Table 40 - Estimated value of B2C e-commerce market - 2004 - 2006; 2010
Table 41 - Growth of online recruitment market - 2004 - 2006
Table 42 - Online gaming revenues - 2004 - 2007
Table 43 - Market share of online search engines - 2005 - 2007
Table 44 - IPTV subscribers by operator - 2007
Table 45 - Jiangsu Telecom broadband users and service revenue - 2002 - 2006
Table 46 - Overview of cable TV market - 2007
Table 47 - Cable TV household growth - 1996 - 2007
Table 48 - Digital cable TV subscribers - 2003 - 2007
Table 49 - Mobile operators, subscribers and annual change - September 2007
Table 50 - Mobile subscribers and annual change - 1995 - 2007
Table 51 - China Unicom CDMA network statistics - 2007
Table 52 - Little Smart (PHS) subscribers and annual change - 2002 - 2007
Table 53 - China Telecom and China Netcom PHS subscribers -2007
Table 54 - Mobile phones manufactured in China - 2004 - 2007
Table 55 - Revenue, CAPEX and market share, China Mobile and China Unicom - 2007
Table 56 - Prepaid mobile subscribers by operator - 2007
Table 57 - China Unicom postpaid versus prepaid mobile subscribers by network - 2004 - 2008
Table 58 - China Mobile postpaid versus prepaid mobile subscribers - 2004 - 2007
Table 59 - Mobile data revenues: top three countries - 2006
Table 60 - China Mobile mobile data service user growth - 2004 - 2007
Table 61 - China Unicom CDMA 1X wireless data user growth - 2004 - 2007
Table 62 - China Mobile and China Unicom mobile VAS revenue - 2007
Table 63 - China Mobile Value Added Business revenue breakdown & annual change - 2006 - 2007
Table 64 - China Mobile VAS revenue breakdown (selected items) & annual change - 2006 - 2007
Table 65 - China Mobile VAS subscribers (selected items) & annual change - 2006 - 2007
Table 66 - Growth of text messages (SMS) in China and annual change - 2000 - 2007
Table 67 - China Mobile SMS usage volume and annual change - 2003 - 2007
Table 68 - China Unicom SMS usage by network and annual change - 2005 - 2007
Table 69 - CNNIC WAP usage report - March 2007
Exhibit 1 - Telecommunications industry statistics from the MII - 2006 and 2007
Exhibit 2 - China’s agreed schedule for telecom liberalisation - 2002 - 2007
Exhibit 3 - Restructuring Scenario 1
Exhibit 4 - Restructuring Scenario 2
Exhibit 5 - Restructuring Scenario 3
Exhibit 6 - China Mobile Limited at a glance - 2007
Exhibit 7 - China Network Communications Group Corporation at a glance - 2007
Exhibit 8 - China Telecom Corporation Ltd* at a glance - 2007
Exhibit 9 - China Unicom Ltd at a glance - 2007
Exhibit 10 - Regional/international fibre optic cable networks
Exhibit 11 - Selected Chinese satellite service providers and satellites
Exhibit 12 - China Satcom satellite fleet
Exhibit 13 - ‘Enemies of the Internet’ - 2005
Exhibit 14 - Types of telecom convergence
Exhibit 15 - IPTV subscriber estimates - 2006
Exhibit 16 - BesTV Corporation
Exhibit 17 - Jiangsu IPTV applications
Exhibit 18 - Overview of ‘eye will’

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