Telcos: China Mobile Slips, Unicom Rises 电信业半年回顾：中国移动滑落 联通顺势崛起
As we reach this year’s halfway point and companies start reporting their mid-year results, I wanted to take a quick look at China’s telecoms landscape and some of the major highlights over the first half of the year, including a recent surge by China Unicom (HKEx: 762; NYSE: CHU), the country’s second largest mobile carrier. China’s 3 telcos, Unicom, China Mobile (HKEx: 941; NYSE: CHL) and China Telecom (HKEx: 728; NYSE: CHA), all released their June subscriber totals late last week, revealing some subtle but interesting changes from the beginning of the year as the trio look to develop third-generation (3G) mobile services that are the wave of the future.
Perhaps most significantly, China Mobile saw its overall share dip below two-thirds of the market in June, coming in at 65 percent as the carrier logged a total of 683 million subscribers. (English article) I’ve been following the Chinese telecoms space for a decade now, and this looks to me like the first time in many years — and possibly the first time ever — that China Mobile has fallen below the two-thirds mark as it faces growing competition from its 2 chief rivals.
The second major point of interest lies in 3G, where Unicom has picked up a few percentage points to now control one-third of the market with 57.5 million subscribers. 3G gains by Unicom, and also by China Telecom, have come at the expense of China Mobile, whose share of the 3G market dropped to 38 percent by the middle of this year, down sharply from around 45 percent a year earlier.
The eroding position for China Mobile was inevitable, as the company has struggled with a technologically inferior 3G network using homegrown technology that it was forced to build by China’s telecoms regulator. That requirement has put the carrier at a distinct disadvantage to Unicom and China Telecom, which were allowed to build networks using globally tested technologies. In addition to its inferior network, China Mobile has also suffered from a lack of good smartphones and other handsets for its 3G service, even as both Unicom and China Telecom have signed deals to offer Apple’s (Nasdaq: AAPL) popular iPhones over their networks. (previous post)
So the question now becomes: how much further will China Mobile’s market share drop before it finally starts to stabilize? My guess is that based on recent moves we’ve seen, China Mobile is already starting to get a bit more aggressive with its 3G network, and could reach an important deal with Apple by the end of this year to offer an iPhone over its 3G network. Still, the company suffers from a distinct credibility problem for its 3G service that could take a year or more to fix, assuming it can improve the service.
At the end of the day, I wouldn’t be surprised to see China Mobile’s overall market share dip as low as 50-55 percent, while it could easily fall behind both Unicom and China Telecom in the 3G space, seeing its share dip to as low as 28-30 percent before it finally stabilizes.
As a footnote to this wrap-up for the first half of the year, it’s also worth noting a recent aggressive push in the 3G space by Unicom, which was a relative laggard in promoting its service for most of last year. Unicom’s push comes as a potentially good sign, perhaps indicating that the company is finally focusing on improving its position following a long-running series of management shuffles. If that continues, look for Unicom’s position to strengthen through the rest of the year in terms of market share, while China Telecom should also make steady gains at the expense of China Mobile.
Bottom line: China Mobile’s overall share of China’s wireless market could drop as low as 50 percent before its position begins to stabilize,with its 3G share potentially falling below 30 percent.
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