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China: Telecoms, Mobile, Broadband and Forecasts

2011/12/03

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  China and its inexorable move up the value chain

China outperformed all other major economies in 2010 with GDP growth over 10%. The government vowed, in the 12th Five-Year Plan released in March 2011, to continue reforming the economy and emphasised the need to increase domestic consumption in order to make the economy less dependent on exports for GDP growth.

According to the International Monetary Fund, China’s share of worldwide GDP is to grow from 1.7% in 1991 to 11% in 2014. This highlights the massive change underway in China. Telecommunications is an important vehicle to drive through this radical shift in economic prosperity and culture.

China’s entire telecommunications market generated around US$140 billion in 2010 contributing around 3% to GDP. It is the second largest telecoms services market in Asia Pacific after Japan. The market is expected to increase at a compound annual growth rate of 8.8% between 2009 and 2014, reaching US$187 billion by 2014, surpassing Japan as the largest telecommunications market in Asia.

The market experienced a settling in period after the government initiated industry restructure in 2008. China Mobile is still the dominant player but the 3G space sees a more equitable distribution of market share. The mobile sector is still expanding at over 15% per annum and 3G services are starting to gain momentum supported by a more mature value chain. Confronted with a continuous decline in the fixed-line market, the government has again intervened to set aggressive targets for broadband services. China became the leading country in the number of digital subscriber line users in 2003 and by 2010 was the leading country in terms of FttX deployment.

There is rapid development of internet businesses in China as the digital economy takes shape. The pace of development has escalated as more and more of the population gain access to the internet. Chinese based online enterprises can target consumers like no western company has been able to do and numerous successful initial public offerings on the NYSE into 2011 are testament to this. Internet users are approaching the 500 million mark, increasingly accessing web sites via mobile phones.

China continues to build a substantial world-class telecommunications infrastructure and the investments show no sign of abating. As data traffic grows, the major operators are keeping pace by increasing both domestic and international connectivity through submarine and terrestrial cable links. The country also has high aspirations with its space program and has developed a local industry to develop, build and deploy communications satellites.

China is at the forefront of technology development, strongly supported by all levels of government. Amongst these initiatives are cloud computing and smart grid deployments and the building of smart cities that support the government’s climate change targets set out in the 12th Five Year Plan.

Market highlights:

  • China had close to 1,200 million phone users by mid-2011, including mobile phones, fixed-line phones and PHS handsets. Mobile subscribers comprised over 75% of the total.
  • Non-voice revenue comprised 40% of total industry revenue and value-added services comprised 25% of total industry revenue.
  • Internet access conditions improved in rural areas as more provinces and municipalities moved into the first echelon of internet development.
  • Broadband investments increased particularly with FttX infrastructure, driven by government initiatives.
  • Nascent IPTV growth was impacted by the government announcement of three-network integration trials of the country’s telecom, broadcast television and internet networks.
  • Mobile TV was introduced using the local China Multimedia Mobile Broadcasting mobile TV standard.
  • Large scale LTE trials were started even though 3G deployments still have to reach critical mass, and government statements that 4G operations will only be approved in 2014.

China – Key performance indicators – 2010, 2011 (e)

Sector

2010

2011 (e)

Internet users (million)

Internet

457

520

Mobile internet

233

303

Broadband subscribers (million)

DSL

100

110

Total

126

150

Subscribers to telecoms services (million)

Fixed-line telephone subscribers

294

280

Mobile phones

859

980

3G share of mobile base

5.5%

9.7%

       
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