Tag Archives: China Telecom

Rather than delve into the latest lackluster results from China Mobile (HKEx: 941; NYSE: CHL), I’ll focus my latest look at China’s perennial laggard telco today on an interesting new initiative that is seeing the company launch wi-fi service on buses. But before I begin with the bus talk, I should at least mention quickly that China Mobile released its latest quarter results last Friday, which showed its profit continued to rise at an anemic rate, 3.5 percent to be exact, missing analyst expectations in the swansong earnings report under recently retired Chairman Wang Jianzhou. (company announcement; English article) Now that I’ve mentioned the boring results, which should come as a surprise to no one, let’s move on to the bus initiative that has seen China Mobile’s Beijing subsidiary team with the local bus operator to develop wi-fi access for commuters, starting with service on the capital’s perpetually congested second ring road. (English article) This latest  initiative is part of the company’s broader wi-fi plans announced last year to setting up 1 million hot spots by 2014, as it tries to create an interesting high-speed Internet offering to compensate for its inferior 3G product based on a problematic homegrown Chinese technology. (previous post) I said last year the ambitious wi-fi build-out was misguided, as hot spots are highly localized and thus far less reliable than a 3G product that can be accessed nearly anywhere in a major city. But that said, I really do like this latest bus initiative for several reasons, including the fact that it’s quite creative and unlike anything I’ve seen before. But creativeness aside, the main attraction of this product is that it could be highly appealing to the thousands and thousands of Beijing commuters who spend 2 hours or more on buses each day in their trips to and from work on the nation’s capital’s perpetually jammed streets. A hot spot in a coffee shop or convenience store isn’t all that interesting, as many such stores already offer their own wi-fi service for free. But no such services are available on most buses and subways, even though these forms of public transport are the place where many people spend their third biggest amount of time each day, behind only their homes and offices. What’s more, time spent on buses and subways is generally considered wasted or idle, making it perfect for people who want to read the latest news or play games with their friends over the Internet. The keys to this initiative’s success will be two-fold. Technology will be the most critical, as consumers won’t embrace this product if they continually lose their signals or have to battle slow Internet speeds. Second will be pricing. To succeed, this product will have to be priced significantly lower than existing 3G services — perhaps as little as half the price — since traditional 3G is more reliable and can also be used for voice calls. Still, despite these technological and pricing challenges, I have to commend China Mobile this time for an interesting initiative that shows it is trying to regain some of the ground it is fast losing to rivals China Telecom (HKEx: 728; NYSE: CHA) and China Unicom (HKEx: 762; NYSE: CHU).

Bottom line: China Mobile’s new wi-fi bus initaitive looks like an interesting move with a 50-50 chance of success, targeting commuters with lots of idle time for web surfing.

Related postings 相关文章:

◙ China Telecom Joins Hot Spot Frenzy Wifi热潮兴起 中国电信与中国移动谁将胜出？

◙ China Mobile Wi-Fi Play Misguided 中移动：百万WiFi热点？

◙ China Mobile Tries 4G Back Door in Shenzhen 中国移动试图绕过监管机构于深圳秘密规划4G网络

China Mobile (HKEx: 941; NYSE: CHL) marked a major milestone last month when Wang Jianzhou stepped down as its long-serving chairman, leaving a mixed legacy at the world’s largest mobile carrier that included the start of what could easily become a long-term decline. Now it is up to the company’s new leaders to try to halt that downward trend, or risk seeing a company that pioneered mobile service in China slowly slide into the realm of second-tier player. One of the first major signals from the company’s new leaders since Wang’s departure a month ago wasn’t very encouraging. That sign came at a recent press conference, where new Chairman Xi Guohua said China Mobile would launch a commercial fourth-generation network in the tech-savvy former British colony by year-end that could support its own homegrown 4G technology standard, called TD-LTE. That announcement — Xi’s first as chairman — continued Wang’s legacy of strongly promoting 4G as the answer to his company’s sputtering fortunes, even though China’s telecoms regulator has indicated it won’t issue commercial 4G licenses for at least a couple of years – the equivalent of an eternity for a fast-moving business like mobile service. Instead of fixating on 4G, Xi and his new leadership team need to turn their focus to China Mobile’s neglected 3G network, based on another homegrown standard called TD-SCDMA. Despite spending billions of dollars to build a TD-SCDMA network, which is already technologically inferior to products from its rivals, China Mobile has done little to promote or develop its 3G service and is rapidly losing position in the space as a result. In his 8 years at China Mobile, Wang built the company into one of the world’s most profitable and cash-rich mobile carriers, increasing its share to a dominant 72 percent of the market by late 2008 from 65 percent when he arrived. But then he hit a roadblock in early 2009 when China formally awarded licenses for 3G. Unlike rivals China Unicom (HKEx: 762; NYSE: CHU) and China Telecom (HKEx: 728; NYSE: CHA), whose licenses allowed them to build networks based on globally developed technologies, China Mobile was ordered to build its network using the homegrown and problem-plagued TD-SCDMA standard. Rather than use China Mobile’s huge cash pile and dominant market position to aggressively develop 3G, the company under Wang spent billions of dollars to build a patchy 3G network and did little to attract new subscribers. It then proceeded to tell the market it was placing its bets on next-generation 4G technology that looked like it wouldn’t be ready for commercial service for at least 2 to 3 years. As the company did this, its share of the 3G market rapidly deteriorated, from around 45 percent a year ago to a current 39 percent. The recent Hong Kong initiative seems to signal 4G will remain the company’s main focus under Xi’s new leadership, continuing Wang’s policy. The only problem is, if the current trends continue, China Mobile could easily see its share of the 3G market – whose users will be the first to make the switch to 4G – rapidly erode to the point where it falls to second or even third place by the time 4G licenses are awarded. By then, China Mobile could well discover that many of its former subscribers who defected to its rivals’ better 3G networks are happy where they are, meaning it will be too late to win them back to the 4G network that is now receiving so much of its energy and resources.

Bottom line: China Mobile’s new leaders need to end the company’s fixation on 4G and focus on the present or risk seeing their company become a second-tier player.

Related postings 相关文章:

◙ China Mobile: Improvement Ahead Under New Leaders 新领导有望助中国移动复苏

◙ China Mobile 3G: Where Are the Subscribers? 中国移动3G：订户在哪里？

◙ China Mobile Tries 4G Back Door in Shenzhen 中国移动试图绕过监管机构于深圳秘密规划4G网络

I don’t like to admit this, but I’m rapidly losing both confidence and interest in China Unicom (HKEx: 762; NYSE: CHU), China’s second biggest telco, which seems to be struggling with a never-ending series of management shuffles that are diverting its attention from its real business. To make matters worse, the company is facing a major challenge from China Telecom (HKEx: 728; NYSE: CHA), the smallest of China’s 3 major carriers, which has just announced some new figures suggesting it will get even more aggressive in its highly effective campaign to steal market share from both Unicom and industry leader China Mobile (HKEx: 941; NYSE: CHL). Let’s look at Unicom first, which has made steady headlines over the last year for all the wrong reasons, mostly involving misjudgement of China’s 3G market and an endless series of management reshuffles. The latest reports center on the latter type of news, with some reports saying the company is now undergoing a shift that will combine its sales and marketing departments, while others simply say adjustments are continuing. (English article; Chinese article) I hope readers will excuse me if I sound too cynical, but Unicom is showing all the signs of a company living in China’s socialist past, when state-controlled work units and their employees had little or no interest in running an efficient business and instead were more interested in the names of their positions and departments, and loved to hold endless meetings that produced no particular results. If this is the kind of company that Unicom wants to become, then perhaps there are some bureaucrats in Beijing who will welcome this return to a friendlier socialist past. But if it wants to be a competitive company, this fixation on bureaucracy needs to end soon. Otherwise the company risks becoming irrelevant and losing its spot as China’s second largest telco to China Telecom. On that front, China Telecom has just announced it is aiming to sell 80 million 3G handsets this year, some costing as little as 300 yuan, or less than $50 each. (Chinese article) I was surprised earlier this year when a company executive implied China Telecom was aiming to add 50 million 3G subscribers this year, which equated to 35 percent growth rate to its total subscriber base from the beginning of this year. (previous post) This new 80 million handset figure implies even more aggressive growth targets, and if the company really added that many new 3G users this year it would translate to more than a 60 percent growth rate over its total user base from the beginning of the year. If the current trends continue, which looks likely, I would fully expect to see China Telecom pass Unicom by the end of this year in 3G subscribers, and could even see it passing Unicom in terms of total subscribers sometime next year.

Bottom line: An increasingly focused and aggressive China Telecom is likely to pass an increasingly mismanaged Unicom by the end of this year in terms of 3G subscribers.

Related postings 相关文章:

◙ China Telecom Turns Up Volume in 3G Drive 中国电信计划一鼓作气 3G市场欲再下一城

◙ Unicom Spends, But Can It Earn? 联通拟增加开支加强3G业务 效果有待观察

◙ China Mobile: Improvement Ahead Under New Leaders 新领导有望助中国移动复苏

Everyone is looking closely at the latest results from China Unicom (HKEx: 762; NYSE: CHU) for signs that China’s second largest mobile carrier has finally put its house in order and can start to generate some excitement, after a dismal 2011 that saw it plagued by mismanagement issues. The results from last year reflect that turmoil, which saw the company fail to gain market share and post weak growth despite being given a big opportunity by the Chinese government to boost its position against its much bigger rival China Mobile (HKEx: 941; NYSE: CHL). Unicom reported its profit rose 14 percent for the year, while revenue was up 22 percent, both below market consensus, especially the profit figure. (English article; results announcement) In fact, the company should be posting much stronger growth as its numbers are coming off a relatively small base, and its 3G network is far superior to China Mobile’s for technological reasons. But the company has failed to capitalize on that technological advantage, with the result that its market share in 3G remained relatively steady in 2011, even as China Mobile’s share declined due to steady gains by the market’s smallest player, China Telecom (HKEx: 728; NYSE: CHA), which embarked on an aggressive marketing campaign for its own 3G network. Based on all the media reports last year, Unicom seemed to suffer from management turmoil throughout many of its major markets, as it tried to fill top positions and consistently underestimated handset demand for certain 3G models, resulting in shortages and lost sales opportunities. Among all the figures and discussion in the latest results, the most interesting seems to be Unicom’s disclosure that its margins will come under continued pressure this year due to high marketing costs, as it tries to improve its 3G network and sign up more subscribers through aggressive promotions including big handset subsidies. It said it expects its 3G business to become profitable during the year, with handset subsidies rising to about 18 percent of 3G revenue. (Chinese article) I’m not opposed to rising marketing costs, as these are largely a one-time spending item that can produce long-term revenue if Unicom can attract more new subscribers and convince them to use its service for years to come. But big spending doesn’t necessarily translate to big revenue gains, and I’m certainly not convinced that Unicom can improve its market position simply by spending more. The company’s past year of poor management is the current standard that the market expects from this company, and it desperately needs to show it can change that to make its new spending binge produce results. Otherwise, 2012 could become just another lost year for Unicom, with expenses rising but little or no growth on the top and bottom lines.

Bottom line: Unicom’s spending boost to build its 3G business in 2012 has less than a 50 percent chance unless the company can clear up its management problems.

Related postings 相关文章:

◙ New Developments, Including iPhone Deal, Heat Up 3G, 4G 中国电信iPhone销售和日益升温的3G、4G最新进展

◙ 2011: China Unicom’s Lost Year 中国联通失落的一年

◙ Sputtering Unicom’s Latest Excuse: Lack of Leadership

Two news tidbits out today on China Mobile (HKEx: 941; NYSE: CHL) nicely illustrate why investors are suddenly getting excited about this company after years of shunning its stock, highlighting big potential at its home market under an incoming generation of new top executives. The news also underscores the company’s largely failed global expansion policy, and why long-serving Chairman Wang Jianzhou needs to step down and let a younger generation of new leaders take over. The first news tidbit is some simple data from a government telecoms official saying China now has just 6 million households getting their Internet service over cable TV lines (English article) — a tiny figure compared with the 130 million households that get broadband over phone lines through service offered by China Mobile’s 2 rivals, China Telecom (HKEx: 728; NYSE: CHA) and China Unicom (HKEx: 762; NYSE: CHU). That number is significant because China Mobile is currently in talks to form a partnership with a new national cable TV operator being created through consolidation of China’s hundreds of regional cable TV companies — providing a serious new wire-based broadband competitor for Unicom and China Telecom. (previous post). That initiative, combined with recent strong signals that China Mobile will boost its 3G and 4G development, have excited investors who had largely lost interest in the company and its slow-growth story, sparking a rally that has pushed the stock to levels not seen since 2009. Meantime, the second news bit comes from Chairman Wang, whose exit has been long anticipated but never seems to come, speaking on the tired subject of global expansion. Under Wang’s leadership China Mobile has made several attempts at global expansion, failing in every instance except for one that saw it take over a small Pakistani carrier on the brink of bankruptcy. Now Wang has revealed that China Mobile is bidding for a 3G license for the Pakistani unit, and will also seek other global expansion opportunities with a focus on emerging markets. (English article) Does this strategy sound familiar to anyone? If it does, then that’s because Wang has been discussing such a strategy for the last 5 years even though he has no results to show for all his talk, except for the Pakistani unit that contributes little or nothing to China Mobile’s top or bottom lines. The bottom line for China Mobile in all of this is that the company should stay focused on opportunities in its domestic market for now, where it can achieve real returns for its investors, and stop thinking about overseas opportunities that offer much less potential and are harder to execute. Put differently, Wang needs to finally step down and hand over management of the company to the new leaders waiting to take over.

Bottom line: China Mobile could reap huge returns from domestic opportunities like cable TV consolidation and 4G, and shouldn’t waste its attention on overseas opportunities.

Related postings 相关文章:

◙ China Mobile Eyes New Nat’l Cable Network 中国移动有望携手中国广播电视网络公司

◙ Telecoms Infrastructure Prepares to Open 中国电信基建市场或更开放

◙ China Mobile Tries 4G Back Door in Shenzhen 中国移动试图绕过监管机构于深圳秘密规划4G网络

An increasingly confident China Telecom (HKEx: 728; NYSE: CHA), armed with a newly signed deal to sell Apple’s (Nasdaq: AAPL) wildly popular iPhones in China, is making some bold predictions about its growth this year, setting the stage for what could easily shape up as a bloody war for 3G subscribers. Chinese media are quoting an executive at the smallest of the nation’s 3 mobile carriers saying the company’s 3G subscriber base could surpass that of its older 2G base by the end of this year. (Chinese article) To me that goal sounds reasonable, admirable and something China Telecom should be aiming for — until I took a look at the numbers. According to its latest data for January, the company had just over 130 million total subscribers, with about 40 million of those using 3G and the remaining 90 million on its older 2G service. So if the 2G number were to remain completely unchanged for the rest of the year, China Telecom would have to add a hefty 50 million 3G subscribers this year to meet the executive’s forecast — a 35 percent increase to its current user base. That growth rate is actually roughly comparable to what China Telecom posted last year, when it began its aggressive campaign to add 3G users. But in terms of actual user numbers, the potential addition of 50 million or more this year would mark a sharp increase from the roughly 36 million subscribers China Telecom added in 2011. China Telecom steadily picked up 3G market share from its 2 larger rivals, China Mobile (HKEx: 941; NYSE: CHL) and China Unicom (HKEx: 762; NYSE: CHU) last year by aggressively courting consumers with a wide range of handsets, price plans and a solid network based on a globally used 3G standard. During that time its share of the market grew from just 19 percent at the start of 2011 to about 28 percent by the end of the year, as it took share away from Unicom and especially China Mobile, which didn’t strongly promote its 3G network based on an untested homegrown technology with numerous problems. China Telecom is clearly looking to focus its efforts in 2012 on 3G, based on the fact that nearly all of its new subscribers in December came from 3G, and all new subscribers in January were also 3G users. The company also made national headlines last week when it officially began selling a version of the iPhone 4S for its 3G network, capping months of talks with Apple in a deal that ended Unicom’s 3-year-old monopoly on iPhone sales in China. Initial sales for the iPhone on China Telecom’s network were reasonably strong, and I expect we’ll hear more about the company’s ambitious plans for both the iPhone and its broader 3G strategy when company executives talk to the media at their press conference on March 20 to discuss 2011 results and their 2012 outlook (earnings calendar). Given its aggressive marketing, solid technology and strong range of products, I wouldn’t be surprised at all to see executives reiterate a goal of adding 50 million 3G subscribers this year, leading to profit erosion in the short term but building a stronger long-term base for the company to pose a serious 3G alternative to its 2 bigger rivals.

Bottom line: Remarks by China Telecom indicate the company plans to turn up its aggressive 3G campaign this year, challenging its 2 rivals for dominance in the space.

Related postings 相关文章:

◙ China Mobile 3G: Where Are the Subscribers? 中国移动3G：订户在哪里？

◙ China Telecoms Faces Power Struggle, Half-Baked 4G 中国电信行业遭遇政府监管权利斗争

◙ China Mobile’s TD 3G Fading Fast 中国移动3G网络前景黯淡