BMI's Executive Summary

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The Sector At A Glance

Key Insights On The Telecomunications Sector of China

China Mobile and China Unicom were unable to report any increases to their average revenues per user (ARPU) during the year ended June 2007. The gains made by both operators in terms of subscriber growth, with 47.463mn net additions to the market between YE06 and July 2007, have been driven by expansion into rural areas. However, this has encouraged a greater number of prepaid customers, reducing the contributions made by higher-value, postpaid subscribers. A higher proportion of prepaid customers has also resulted in lower consumption of operator services and limited traffic growth.

For now, it would appear that China's mobile operators are content with raising their subscriber figures, rather than increasing the quality (in revenue terms) of their customers. Having said that, we have seen value-added services (VAS) continue to rise as a percentage of total revenues, and believe that VAS stood near 20% as of June 2007. China Mobile has been making an aggressive push into the mobile internet sector, having developed its own wireless portal, Monternet, over the past two years. Subscribers to mobile internet have risen from 17mn at the end of 2006, to 44mn in H107, which is over a quarter of China's 162mn internet subscribers. As for China Unicom, the operator has been busying itself with the commercial launch of its mobile TV services, which could reach a value of US$36mn by the end of 2007 and grow to US$98mn on the back of the 2008 Olympic Games in Beijing.

With the award of 3G licenses approaching, we continue to witness developments across the sector, both on the operator and vendor sides. China Mobile is expected to trial its TD-SCDMA network in September 2007, initially limited to one city. Already the value of TD-SCDMA telecoms equipment has been rising rapidly, to around US$1bn in Q207. Naturally, the major recipients have been Chinese equipment vendors. ZTE took a 45.8% share of the market, followed by Datang on 27.2%. However, with the development of the two foreign 3G standards pending, some of the world's largest equipment vendors have also been adding to their production facilities, with Sony Ericsson adding a third factory. Operators have sought to obtain a foothold in this potentially lucrative market. South Korea's SK Telecom recently converted outstanding bonds into shares equal to a 6% stake in China Unicom.

Although China Unicom has not officially reported on these reports, it has been announced in the local media that the operator could be split into two, China Telecom (a CDMA standard mobile operator) and China Netcom (a 3G service provider), in the face of declining fixed voice revenues. This could see China Telecom acquire China Unicom's CDMA network, while China Netcom would be left with its GSM network. While this would indicate another step closer to the opening of China's hotly-anticipated 3G tender, it also falls into line with earlier industry restructuring carried out in July 2007. Local press reports state that China Telecom has no intention of obtaining China Unicom's CDMA network.

However, the fact that China Telecom recently hired an executive with mobile experience would suggest otherwise. Zhang Chenshuang was formerly a vice president of China Mobile.

Contents

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Chapter 1 - Executive Summary

Chapter 2 - Business Environment

Asia

China

China Telecoms Business Environment SWOT

Chapter 3 - Industry Forecast Scenario

Fixed-Line

Table: China Telecoms Sector – Fixed-lines – Historical Data & Forecasts

Mobile

Table: China Telecoms Sector – Mobiles – Historical Data & Forecasts

Internet

Table: China Telecoms Sector – Internet – Historical Data & Forecasts

Multimedia

Table: China Telecoms Sector – Historical Data & Forecasts

Chapter 4 - Macroeconomic Forecast Scenario

Table: China: Macroeconomic Data And Forecasts

Chapter 5 - Country Snapshot: China Demographic Data

Section 1: Population:

Table: Demographic Indicators (2005)

Table: Rural/Urban Breakdown

Section 2: Education & Healthcare

Table: Education

Table: Healthcare: Vital Statistics

Table: Healthcare: Expenditure

Section 3: Labour Market And Spending Power

Table: Employment Indicators

Table: Consumption and Stratification

Table: Wages per year

Chapter 6 - Competitive Landscape

Market Structure

Competitor Analysis Tables

Table: Key Players: China Telecoms Market

Table: Selected Operators Revenue Growth 2002-2005

Key Players

Fixed-Line

Table: Regional Fixed-Line Penetration Overview

Mobile

Table: Regional Mobile Penetration Overview

Market Data Analysis

Operators

Fixed-Line

Table: Comparative Study Of Operational Data – China Telecom/China Netcom – September 2006

Table: China Local Access Market, September 2006

Mobile

Table: China Mobile Market, September 2006

Table: China Mobile Market, Net Additions – March-September 2006

Table: China ARPU Levels, 2003-2006

Table: China AMOU levels, 2003-2006

3G

Manufacturers

Table: Nokia Mobile Device Sales (mn units) by Region

Facing Profit Falls, ZTE Needs To Broaden Appeal

Table: ZTE Profits, Q306 (CNYmn)

Industry Developments

India Outstrips China As Leading Subscriber Growth Market

China Telecom In Strategic Partnership Discussions

Other Industry Developments

Chapter 7 - Company Profiles

Regional Case Study – Motorola

Table: Motorola Net Sales by Region (US$mn)

Table: Motorola Market Sales by Locality of End Customer

Table: Leading Mobile Phone Handset Sales (mn) – Q306

Profiles – Operators

China Telecom

China Netcom Group Corporation (Hong Kong)

China Mobile (Hong Kong)

China Unicom

Profiles – Manufacturers

Motorola

Huawei Technologies

Siemens

Nokia

Ericsson

ZTE Corporation

Alcatel Shanghai Bell

UTStarcom

Chapter 8 - BMI Forecast Modelling

How we generate our industry forecasts

Telecommunications Industry

Sources

Chapter 9 - Appendix: Regional Demographic Data

Table- Manufacturing Wages (ave per annum), US$

Table – Population

Household Spending Per Capita, US$

Private Consumption Per Capita, US$ PPP

Market Size, GDP, US$bn

Competitive Landscape for Asia Telecommunications Reports: Sample of Companies Ranked

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Commentary on key operators highlighting ownership structures, latest available revenue figures, market share analysis and ARPU counts. BMI forecasts for all headline macroeconomic indicators, including real GDP growth, inflation, fiscal balance, trade balance, current account and external debt. Company SWOTS Covering all leading telecommunications operators and manufacturers operating in each market, including competitive intelligence on geographic presence and competitive positioning against local companies; local market share; leading products, services and technologies; foreign direct investments, projects, merger and acquisition strategies.

Network of Asian Telecommunications Sources

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BMI's Asian Telecommunications Reports are based on an extensive network of multilateral organisations, government departments, telecommunications industry associations, chambers of commerce and company reports. Information sources include: