China Mobile Communications Essay

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China Mobile Limited (“China Mobile”) is China’s leading mobile services provider, having developed the largest mobile phone network and subscriber base in the world. The combination of continued rapid growth in China’s economy, rising consumer purchasing power, the development of the rural economy, and the acceleration of consumer demand for information services is driving remarkable growth in the mobile phone market. Despite rapid growth, however, market penetration in mainland China is still only around 40 percent (2007). China Mobile enjoys a market share of almost 70 percent (2007); however, changing regulations, major industry restructuring, new competitive pressures, and industry convergence will make this level of market domination difficult to maintain.

China Mobile (Hong Kong) Limited was incorporated in Hong Kong in September 1997 and listed in New York and Hong Kong in October 1997. The name change to China Mobile Limited was effected in 2006.

China Mobile’s scope as a network provider includes a comprehensive range of voice, data, and value-added services. Value-added voice services include caller identity display, caller restrictions, call waiting, call forwarding, call holding, voice mail, and conference calling. Value-added data services include Short Message Services (SMS), Wireless Application Protocol (WAP), customized ring tones, Multimedia Messaging Services (MMS), Machine-to-Machine and Man-to-Machine applications, as well as many industry-specific applications.

In 2007 China Mobile’s subscriber base reachedn370 million, an annual net increase of 22.6 percent. Operating revenue increased 20.9 percent to US$44.6 billion (RMB 357 billion), comprising an increase in average subscriber monthly usage (45.3 percent), and strong growth in value-added business (32.2 percent) and SMS usage (42.3 percent). The company’s 2.12 million corporate customers also provide an important marketing base for the development of associated individual-user contracts.

China Mobile’s competitive advantages are underpinned by the scale of its operations. Its 307,000 base stations provide 97 percent coverage of the population in mainland China. Its sales, marketing, and support systems comprise more than 72,000 sales outlets providing strong representation throughout China including the difficult-to-reach rural, inner, and western markets. China Mobile’s GSM roaming services are provided through 350 operators in 231 countries and regions.

While China Mobile is strongly positioned to capture a major share of the continuing growth potential, several strategic challenges lie ahead. In May 2008 the Chinese government announced plans to create three major telecom groups in an effort to rebalance the industry between the highly dynamic and prosperous mobile operators and the recently sluggish fixed-line operators. China Mobile is expected to play a significant part in one of the three groups and is expected to participate in a wave of acquisitions and mergers. Changes to regulations on call tariffs have also required considerable adjustment and an increased focus on productivity and efficiency.

In April 2008 China Mobile began testing its third generation mobile communication platform (3G) that will allow development of more sophisticated networks with higher data-transmission speeds and capabilities. This is critical to applications such as TV and movie services, music, internet services, and enhanced mobile payment systems. Approximately 60 percent of the company’s capital expenditures were dedicated to construction of the GSM network in 2007 with another 55 percent of CAPEX to be allocated to network development in 2008. In June 2008, facing slower than expected adoption of 3G in early technical and marketing trials, China Mobile announced that it would extend the 3G network from the previously planned 10 eastern cities to all 31 provincial capitals.

New competitors are expected to emerge quickly both from within the industry and through cross industry convergence. In order to maintain competitiveness, China Mobile will seek to leverage strategic alliances such as those currently in place with organizations such as News Corporation, Sun Microsystems, Inc., and Alcatel-Lucent. A highly publicized failed negotiation with Apple, Inc., in 2008 underscores the importance China Mobile places on cross industry alliances. With rural markets set to provide a substantial part of future growth in the Chinese mobile phone market, the company is well positioned to optimize the geographic advantage of its technical and sales resources.

Bibliography:

  1. AFP, “China Plans Three Telecom Giants,” www.afp.com (cited March 2009);
  2. China Business Services, “Bell (Finally) Rings For Telecoms Reform,” www.2chinabusinessservices.com (cited March 2009);
  3. China CCM, “2006–2007 Annual Report on Mobile Phone Marketing Channel & Custom Model in China” (2006);
  4. Leopoldina Fortunati, Anna Manganelli, Pui-lam Law, and Shanhua Yang, “Beijing Calling … Mobile Communication in Contemporary China,” Knowledge, Technology, & Policy (v.21/1, 2008);
  5. Jia Lu and Ian Weber, “State, Power, and Mobile Communication: A Case Study of China,” New Media & Society (v.9/6, 2007);
  6. “Telecoms in China,” The Economist (May 29, 2008).

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