China 3G: Entering Slow-Growth Phase? 中国3G：进入缓慢增长阶段？

By newsdoug on May 23, 2012

China telcos slow 3G promotions After a year of rapid growth for China’s young 3G mobile networks, the nation’s 3 carriers have suddenly slowed down their addition of new subscribers, perhaps tiring of aggressive promotions that have hurt profits and signaling a new slower growth phase for high-speed wireless services. The slowdown in addition of new 3G subscribers during April surprised me a bit, as China Mobile (HKEx: 941; NYSE: CHL), China Unicom (HKEx: 762) and China Telecom (HKEx: 728; NYSE: CHA) all seem to have decided at the same time to rein in their new sign-up efforts, according to the latest monthly data from the 3 companies. (Chinese article) According to Chinese media reports that have analyzed the latest numbers, new monthly 3G subscribers in April at China Telecom and China Mobile were the lowest for both carriers this year. April additions at Unicom were also the second lowest monthly total this year, behind only the traditionally slow month of February. The drop for China Mobile was quite dramatic, falling to just 2.3 million new subscribers in April from figures closer to 2.7 million or higher in previous months. Likewise, China Telecom, the most aggressive of China’s 3G carriers in 3G, added just 2 million new 3G subscribers in April, well below the 2.4 million it was averaging in each of the first 3 months of this year. It’s probably still too early to say if this sudden slowdown marks the beginning of a new trend, especially since April contained the 3-day Qing Ming holiday that may have dampened sales somewhat. But I suspect this slowdown could turn into a trend in the summer months ahead and perhaps all the way through to the fall, as the 3 carriers take a rest from aggressive 3G promotions that have helped them to quickly gain new subscribers but have cost them on their bottom lines. China Telecom has been the most aggressive in 3G, spending heavily to promote the service with bit subsidies and a recent deal to offer Apple’s (Nasdaq: AAPL) iPhone on its network. Those heavy promotions took a toll on the company’s bottom line, with China Telecom’s profit falling 6.5 percent in the first quarter, as the company largely blamed its aggressive 3G strategy for the unexpectedly big decline. (English article) China Mobile had been less aggressively promoting its 3G, largely due to problems with its network that is based on a homegrown Chinese technology called TD-SCDMA. But the company was showing recent signs of becoming more aggressive following the recent retirement of its long-serving chairman Wang Jianzhou, with its new leadership restarting talks to develop an iPhone for its 3G network. (previous post) Unicom had also been less active last year due to a series of management shuffles, but was also showing signs of becoming more aggressive this year. I suspect that this slowdown will probably last for at least the next 3 months, with China Telecom in particular wanting to show investors some better profit figures for the current quarter. But when fall comes, look for the competition to heat up again, especially as all 3 carriers rush to meet aggressive annual targets set by the telecoms regulator. (previous post)

Bottom line: The latest data show a sudden slowdown in 3G promotions by China 3 telcos, which will probably last until the fall.

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