Business

There was an increasing number of complaints from consumers about the Chinese telecommunications industry in the third quarter, mainly about broadband and mobile Internet services, the Ministry of Industry and Information Technology, the industry regulator, said on Monday.

These were due, in part, to industry reorganization, which began in June. Under the reorganization, China Mobile acquired China Tietong, China Unicom merged with China Netcom and China Telecom acquired China Unicom’s CDMA business.

Service levels are expected to improve when the industry revamp is finished early next year, industry insiders said.

There was a total of 130 kinds of irregular activities and 10,334 complaints during the quarter. These involved Chinese telecom value-added service providers, who were punished by local telecom administrations.

Among them, 12 inter-provincial telecom value-added companies were dealt with by telecom administrations in at least three or more provinces and municipalities, the ministry said.

The major problems included cheating, subscription irregularities and services not as promised.

Complaints about the top Chinese carriers, China Mobile, China Telecom, China Unicom and China Netcom, ranged from 11 to 36 percent higher in the third quarter than the previous quarter, the ministry said.

The four companies account for more than 95 percent of China’s market share.

With the structure of the industry changing rapidly and the popularity of many new services, such as mobile TV and IPTV, it was inevitable problems would arise, industry insiders said.

(Shanghai Daily November 25, 2008)

The Chinese government is currently studying the modalities of the 3G licensing policy along with ways to implement it and is likely to announce the policy soon, said China’s vice minister of Industry and Information Technology Xi Guohua.

Speaking at the China Mobility International Summit in Beijing today, Xi said the time is now ripe for China to issue 3G mobile licenses.

Xi’s remark reflects the government’s intention to speed up issue of 3G licenses. The issue has been hanging fire for some time due to the government’s support for TD-SCDMA, China’s home-grown 3G mobile telecommunications standard. It is believed that this standard still needs some more time to compete with rival technologies like CDMA2000 and WCDMA.

With China’s economic growth starting to slow down, the government now seems to be keener on starting 3G services. The services are expected to generate investments running into billions for network expansion, upgrades and replacement of handsets.

Chang Xiaobing, head of China Unicom, said last week that China may unveil the 3G licensing policy by the end of this year.

China Mobile is expected to get a license for TD-SCDMA while China Unicom and China Netcom may get licenses for WCDMA and CDMA2000 respectively.

(China Daily November 25, 2008)

There was an increasing number of complaints from consumers about the Chinese telecommunications industry in the third quarter, mainly about broadband and mobile Internet services, the Ministry of Industry and Information Technology, the industry regulator, said on Monday.

These were due, in part, to industry reorganization, which began in June. Under the reorganization, China Mobile acquired China Tietong, China Unicom merged with China Netcom and China Telecom acquired China Unicom’s CDMA business.

Service levels are expected to improve when the industry revamp is finished early next year, industry insiders said.

There was a total of 130 kinds of irregular activities and 10,334 complaints during the quarter. These involved Chinese telecom value-added service providers, who were punished by local telecom administrations.

Among them, 12 inter-provincial telecom value-added companies were dealt with by telecom administrations in at least three or more provinces and municipalities, the ministry said.

The major problems included cheating, subscription irregularities and services not as promised.

Complaints about the top Chinese carriers, China Mobile, China Telecom, China Unicom and China Netcom, ranged from 11 to 36 percent higher in the third quarter than the previous quarter, the ministry said.

The four companies account for more than 95 percent of China’s market share.

With the structure of the industry changing rapidly and the popularity of many new services, such as mobile TV and IPTV, it was inevitable problems would arise, industry insiders said.

(Shanghai Daily November 25, 2008)

Editor: Bruce Meng
25 Nov 2008 05:54:40 GMT

MACAU, Nov 24 – Asian telecom stocks are no longer a surefire defensive play for these financially turbulent times, with even China and India expected to see pain in the short term as a gloomy economic outlook stretches into 2009.

Analysts and executives at the 2008 GSMA Mobile Conference last week in Macau warned heavyweights such as Japan’s NTT DoCoMo <9437.T> and South Korea’s SK Telecom <017670.KS> will struggle to wring more revenue out of saturated markets as competition intensifies.

And many players in Asia’s high-growth markets, led by China and India, are battling with lower "ARPUs" and slowing subscriber growth, while they compete to provide more value-added services such as multimedia and games as consumer expectations accelerate.

ARPU, or average revenue per user, is a key performance indicator for telecoms firms.

"For China, the penetration rate is relatively low, the prospects are still there. It’s not saturated, but the growth will slow because of the impact of the financial crisis," said Hong Kong based ICEA Securities analyst Kary Sei.

"The major driver is rural customers, but they are low-end users and just pay a little. The operators are now relying on value-added services because they want to maintain their ARPU."

Beijing in May unveiled a sweeping industry reshuffle that will see the creation of two full-service competitors — China Unicom <0762.HK> and China Telecom <0728.HK> — to China Mobile via mergers and acquisitions.

Slowing income growth, as even China’s breakneck economy feels the fallout from the worst financial crisis since the Great Depression, is set to exacerbate the already intense competition for new customers.

"Lower GDP/capita implies lower average income per capita, and hence lower subscriber growth and lower ARPUs compared with our previous expectations," Morgan Stanley said in a research note downgrading China telcos’ earnings outlook.

EYES ON INDIA

Executives say low penetrations rates in India, the world’s fastest expanding mobile market, will continue to benefit dominant player Bharti Airtel <BRTI.BO>.

But intense price competition and balance sheet issues will hamper foreign players such as Etisalat <ETEL.AD>, Sistema <SSAq.L> and NTT DoCoMo seeking a slice of the market via stakes in local firms.

Norway’s Telenor <TEL.OL>, which derives a third of its revenue from operations in Pakistan, Malaysia, Thailand and Bangladesh, is moving into India with $1.1 billion deal for a 60 percent stake in India’s Unitech Wireless, and planning to fund the deal with a rights issue.

But JP Morgan has estimated the deal could destroy $2 billion of value and give earnings dilution of greater than 30 percent in the near term.

"We know that growth will be reduced," Jon Frederik Baksaas, Telenor’s CEO warned at the 2008 GSMA Mobile Asia Congress. "Every market will be seeing the impact of the financial crisis. There will be more phases of economic growth."

But while analysts say the current liquidity crisis will hurt greenfield operators in India, it is seen benefitting Bharti Airtel, which controls roughly a quarter of the mobile subscriber market, has strong cashflow and no immediate need to raise capital.

"New entrants have achieved very low ARPUs, which indicates revenue share stability for incumbents like Bharti despite a seemingly successful entry by new entrants," said Citigroup, who has a "buy" rating on Bharti and says "no one else comes close".

Macquarie, CLSA, JP Morgan, and Goldman Sachs all say Bharti is the top pick in India’s telecom sector.

Bharti is Goldman’s only "buy" rated stock in the sector. The bank has a "neutral" rating on Reliance Communications <RLCM.BO> and a "sell" on Tata Communications <TATA.BO>.

Researcher Gartner forecasts India’s mobile user base will more than double to 737 million by 2012. Just over a quarter of India’s 1.1 billion population currently own a mobile phone, compared with a penetration level of about 85 percent in Japan and more than 100 percent in Singapore and Hong Kong.

"VALUE-CHAIN SQUEEZE"

Still, Bharti is taking no chances and counting on value-added services to grow revenue.

"We are not a music company, we are a telecom company, but our turnover of music is more than other music companies in India," Bharti’s CEO Manoj Kohli claimed at the 2008 GSMA Mobile Asia Congress.

But operators in saturated markets are finding the push for value-added services can bring its own problems.

Consumer expectations for music, Internet, and advanced messaging capabilities are growing all the time, while search engines such as Google <GOOG.O> encroach upon operators’ turf.

"We are now competing with companies such as Google and Yahoo — I call it the value-chain squeeze," SK Telecom CEO Shin-Bae Kim said, adding that the open-platform, Web 2.0 era has forced his firm into an era of "hyper-competition".

"There’s many disruptive business models."

ZTE Corp has won a contract worth 1.33 billion yuan (US$195.6 million) from China Telecom to expand the telco’s newly acquired mobile network, and with this deal it will become the leading player in the domestic CDMA (code division multiple access) network equipment market, the supplier said yesterday.

The deal will likely boost Shenzhen-based ZTE’s chances to secure further orders from China Telecom, which plans to invest a total of 80 billion yuan over three years to upgrade its mobile network which it acquired from China Unicom, industry insiders said.

ZTE, the country’s biggest public telecom equipment maker, will provide China Telecom wireless equipment for the CDMA network and related services valued at 1.27 billion yuan. The other 61 million yuan will be spent to expand China Telecom’s fixed-line network expansion, ZTE said in a statement.

“ZTE now leads the Chinese CDMA market with a one-third share and we are expanding our business globally,” the firm said in the statement.

ZTE was involved in 10 of the 12 latest CDMA deals globally, United States-based research firm EFL Wireless said in a note in August.

ZTE also has a 28-percent share of the market for China Mobile’s latest TD-SCDMA (time division-synchronous code division multiple access) network equipment tenders in 28 cities nationwide. ZTE is said to be in a leading position in the bids, several media reported recently. ZTE, however, declined to comment yesterday.

The TD-SCDMA is a home-developed 3G technology. But the two global third generation standards – CDMA 2000 and WCDMA (wideband-CDMA) – are expected to be available in China too. China Unicom will adopt the WCDMA system. China is widely expected to issue 3G licenses next year or even earlier.

Shenzhen-listed ZTE fell 1.87 percent to close at 20.97 yuan yesterday.

(Shanghai Daily November 19, 2008)

China took another step toward its long-cherished goal of operating high-speed telecom services, with China Mobile dishing out over US$4 billion of deals and smaller rival Unicom hoping to win a 3G license soon.

But analysts continued to warn that while the billions of dollars need to be invested under an ambitious government-orchestrated plan, carriers and investors should not expect quick returns with consumers likely to tighten spending in a worsening economy.

A mobile phone demostrates mobile television service on the third-generation (3G) high-speed wireless communication networks at a recent telecom show.[China Daily]

China Mobile, the world’s largest mobile provider, is now in talks with Motorola and Sony-Ericsson on acquiring dual-band cellphones that can used on China’s homegrown third-generation wireless standard, known as TD-SCDMA.

Chairman Wang Jianzhou said yesterday the firm had completed tenders for the building of the second phase of that network, sealing deals worth reportedly 30 billion yuan.

That will allow the firm to jumpstart construction of a network that is expected to begin operating in mid-2009.

“With TD-SCDMA, one headache now is that the available handsets are just not of good enough quality,” Wang told Reuters in a brief interview on the sidelines of an Asian wireless telecommunications conference.

Wang said customers in trials had complained about dropped lines, a problem with handsets and not the network.

But revenue from 3G applications and content such as multimedia, music and games will not come in time to offset a sharp deceleration in consumer spending. China Mobile last month posted a 26-percent jump in third-quarter net profit but disappointed investors with a sharp drop in growth.

“To try and compensate for the slowdown in revenue growth, we’re going to accelerate the pace of our investment in rural markets,” Wang said.

China’s Mobile’s second phase of 3G expansion would expand services to 28 more cities, taking the mobile giant’s coverage to 38 cities next year, Wang added.

But the competition is coming on fast.

China Unicom, the smaller of the country’s two existing mobile operators, expects Beijing to speed up the issue of 3G licences, Chairman Chang Xiaobing said on yesterday.

Meanwhile, developing a TD-SCDMA network will take time for China Mobile – which may hurt its current two-thirds share of users – and the market is not yet big enough to justify full commercial operations, said Marvin Lo, telecom analyst for Daiwa Securities.

“With economic conditions deteriorating… very likely consumers will tighten their spending,” he said.

Wang would not say which firms had won tenders, or for how much.

ZTE Corp, China’s No 2 telecommunications equipment vendor, had won about 28 percent of the 30 billion yuan in orders from China Mobile, the South China Morning Post reported over the weekend.

ZTE executives declined to confirm nor deny that on yesterday.

Other winners in the tender may include Datang Mobile, the patent and holder of the TD-SCDMA technology, together with Alcatel Shanghai, Huawei Technologies and Siemens Networks, the newspaper said.

Shares of ZTE slid as much as 6.4 percent, while China Mobile dived 3.8 percent – narrowly outperforming the benchmark Hang Seng Index’s 4.5 percent fall.

China Mobile said on Tuesday it will sign a contract with Nokia for the Finnish firm to supply dual-band handsets next year compatible with both GSM and TD-SCDMA networks.

Wang told reporters the company was also in talks with Motorola and Sony-Ericsson on the supply of dual band handsets.

Unicom chairman Chang Xiaobing told reporters that he hoped the company would get a 3G license by year-end. Unicom aims to have data services account for 50 percent of revenue in future, Chang said, but did not give a timeframe for that target.

“I suspect that licence may not be issued by year-end as China Unicom is hoping for. They (Chinese government) will put a higher priority on the development of TD-SCDMA first before any 3G licence could be issued,” Lo argued.

(China Daily / Agencies November 19, 2008)

Canadian smartphone maker Research In Motion (RIM) expects to grow over 100 percent annually in China in the next few years, although the economic crisis may slow growth in the world’s largest cellphone market.

Jim Balsillie, co-CEO of RIM, which makes BlackBerry phones, told China Daily that wireless data services for small business productivity and personal lifestyle still offer immense opportunities for growth in China.

Balsillie said that RIM needs to tap small and medium-sized enterprises, small office/home office and individual customers for growth in China over the next few years.

Global handset sales grew only 5.4 percent in the third quarter of this year from a year earlier, a six-year low, largely due to a slowdown in mobile phone sales in emerging markets, according to research firm Strategy Analytics.

In China, the growth rate may have declined from 30 percent last year to 15 percent this year, according to Pang Jun, analyst from GFK China. The growth figures for 2009 could be even lower, the research firm said.

But Balsillie said although the overall cellphone market has flattened, sales of smartphones, or handsets with computer-like features such as access to e-mail and corporate data, will continue to record high growth. “It may grow at a lower rate, but it still grows quite a bit,” he said.

“And I would be shocked if China’s mobile phone business does not show double-digit growth in 2009,” he added.

Analysts are worried that the cost-cutting measures being implemented by many firms globally in the wake of the economic slowdown, may dissuade corporate customers from upgrading their BlackBerry models.

RIM, however, is not facing the same challenge in China as it is still signing up new customers after it started services in the country in May 2006.

The company had for long faced hurdles in its China plans due to regulatory issues. In 2006 it entered the local market by partnering with China Mobile.

RIM made a breakthrough in March this year when its BlackBerry 8700 services were launched for corporate customers in China.

Balsillie said RIM will now expand its customer base from the traditional enterprise customers. “I think we are ready for the next step and you will see some new initiatives from us in the next couple of months,” he said.

(China Daily November 18, 2008)

The top management of a world-leading wireless solutions provider said Friday that the current world financial crisis might be an opportunity to compel Chinese economy to be more fluid, transformative and value-added.

Jim Balsillie, co-CEO of Research In Motion (RIM), a Canadian IT company that offers the reputed BlackBerry mobile handsets and wireless solutions, said in an exclusive interview with Xinhua, “Nobody likes the crisis, but it puts greater urgency on China to step towards the next stage.”

“Because it emerges so fast while having not so much infrastructure legacy,” Balsillie said, “China is actually more ready to transform approaches on running the economy, from financial to banking, and from business productivity to high technology.”

“Faced with opportunities and challenges as well, China has a lot of room to replace the traditional strategies with value-added ones,” Balsillie said.

Based on his confidence in the Chinese economy and the market, Balsillie helped RIM (Nasdaq: RIMM) land on the world’s biggest mobile telecommunication market, with more than 600 million cell phone users. It cooperated with the Chinese state-owned mobile telecom service provider China Mobile in 2006 to proliferate its innovative handsets and wireless solutions to Chinese clients, mainly corporate ones.

The Quarter 2 financial report showed RIM clinched US$2.58 billion of revenues in the second quarter of this year, with a quarter-on-quarter increase of 15 percent and a sharp growth of 88 percent compared with the same period last year.

The biggest chunk of the revenues were from BlackBerry smart phones. There are more than 19 million BlackBerry users worldwide, mostly well-positioned business people.

As China is building the third-generation mobile networks, such as TD-SCDMA and SCDMA, service providers would have more incentives to offering value-added services on those fancy networks.

“RIM can push various innovative applications to satisfy much more diversified needs of our customers,” Balsillie said.

Founded in 1984 in Waterloo, Ontario of Canada, RIM started its extraordinarily fast market expansion in North America. One killer’s application of BlackBerry systems was real-time delivery of time-sensitive information like e-mails, which successfully won high-end cell phone users in North America and Europe.

To keep its innovative edges, RIM usually invests 15 to 20 percent of sales revenues on research and development. “We have a culture of innovation which focuses on new ideas, collaboration and transparency,” Balsillie said.

“We carefully look on what people are doing on the Internet and provide BlackBerry users interface to wise applications, good designs and great engineering,” the co-CEO said.

(Xinhua News Agency November 7, 2008)

Dopod expects a 50-percent jump in revenue in the Chinese mainland this year despite the financial crisis which has dragged consumer confidence downward, the smartphone maker said yesterday in Shanghai.

Dopod, whose overseas brand is HTC, displayed its G-Phone yesterday and said the models with Google’s Android system will be available in the mainland in the second quarter next year.

After posting high growth this year, Dopod’s sales will continue to surge in the domestic market next year when faster networks are slated to be ready, said Jackie Zhang, Dopod’s marketing director, who declined to provide detailed sales figures.

He said that with more 3G services being planned and the launch of Wi-Fi, Dopod’s revenue would be boosted.

China’s mainland is widely expected to issue 3G licenses next year to China Mobile, China Unicom and China Telecom. The 3G networks allow users to enjoy more high-speed data services such as video calls, film downloads and remote monitoring on phone.

The two 3G technologies, CDMA2000 (code division multiple access) and WCDMA (Wideband CDMA), are used globally.

The third, the home-grown TD-SCDMA (Time Division-Synchronous CDMA), has been tested by China Mobile in major cities nationwide, including Shanghai and Beijing.

Dopod has launched TD-SCDMA phones and provided CDMA, both 3G and 2G, phones to China Telecom.

The WCDMA phone is a strong part of the company’s portfolio as many models are now used in overseas markets, Zhang added.

(Shanghai Daily November 12, 2008)

China’s top telecoms carriers displayed next-generation products and services during the China International Industry Fair yesterday. It was the first time telecoms firms have showcased their products since the industry reorganization announcement earlier this year.

Carriers, such as China Telecom and China Unicom, exhibited 3G and fixed-mobile convergence services, such as mobile video monitoring and family gateway systems that allow users to access the Internet through their televisions.

China Telecom, which acquired China Unicom’s code division multiple access (CDMA) network under the reorganization, unveiled its mobile services under the brand Surfing (Tianyi in Chinese).

China Telecom also said it has expanded its video-monitoring services to work on mobile phones.

“People can use it to monitor babies or elderly relatives and control the cameras through phone handsets,” said an official at the China Telecom booth.

China Telecom also displayed enhanced 3G networks with a peak speed that will enable users to download three songs in a second.

Handset-based music and TV services, wireless data cards and mobile Internet will become the most profitable sectors for the company in the 3G era, said Shi Chengbin, an official at China Unicom’s Shanghai branch.

China announced the industry re°?organization in the middle of this year. As part of the moves, China Unicom merged its GSM business with China Netcom, and China Telecom acquired China Unicom’s CDMA business.

China, the world’s largest mobile phone market, is now expected to issue its first batch of 3G licenses.

China Unicom displayed its Wideband CDMA services for family users, which will allow users to access the Internet through TVs or phone handsets. Once 3G licenses are granted, China Unicom will be able to upgrade GSM to WCDMA in Shanghai within two to three months, according to the company. China Mobile also displayed home-grown 3G TD-SCDMA services at the show. By the end of last month, more than 20,000 TD-SCDMA data cards, which allow laptop users to access the Internet wirelessly, had been sold in Shanghai, according to China Mobile.

(Shanghai Daily November 5, 2008)