- Key Trends in PHS
- Operator Activities
- Handset/Equipment Vendors
- 3G


Key Trends in PHS



The total PHS subscriber base topped 50 million at the end of April, up from 47.9 million in March. April subscriber additions slowed to 2.1 million, down 42% from 3.6 million in March, according to the Ministry of Information Industry (MII).

China Telecom still holds the lion's share of the PHS subscriber base. China Telecom had 33 million PHS subscribers as of April, accounting for 66% market share, while China Netcom had 17 million subscribers with 34% market share.


Operator Activities

Beijing Communication Cancels Monthly Packages

Beijing Communication cancelled monthly PHS package services at the end of May. The operator did not provide a reason for the cancellation.

Previously, Beijing Communication offered two types of monthly flat-rate packages. Students and teachers could receive unlimited airtime for just RMB 70 per month, while those in the police force were charged RMB 65, both significantly cheaper than conventional discount packages.

Despite the operator requiring users to provide identification when subscribing to the packages, distributors where unable to strictly enforce the rule, resulting in a high number of subscribers that were not teachers or employed in the police force signing up for the packages, according to domestic media reports.

Beijing Communication discovered that many of these monthly package users took advantage of the flat-rate scheme, clocking up huge volumes of airtime and thousands of RMB worth of free phone calls.

Although the cancellation of the monthly packages will plug losses stemming from the "unauthorized" use of the monthly packages, it may also dampen demand for Beijing Communication's PHS service. The monthly packages had been a big growth driver for PHS since they were offered in October last year. The cancellation is likely to hamper the operator's efforts to grow its subscriber base.

Beijing Communication has been struggling to boost its PHS subscriber base, adding just 100,000 users by March 2004. As of the end of May, Beijing Communication had over 700,000 subscribers up from 530,000 at the end of last year. It is targeting 1 million new PHS subscribers this year.


Shanghai Telecom launches PHS services in Urban Shanghai

Shanghai Telecom launched urban PHS services on May 18th and has seen strong initial uptake. To help drive subscriber uptake, Shanghai Telecom is offering handset subsidies. For example, a subscriber can receive a free handset by paying an upfront voice fee of RMB 450 (USD 58).

Shanghai Telecom originally planned to set up 11,000 cell stations in urban areas by May 17th, but has only deployed less than 5,000 cell stations to date, according to domestic news reports.

Prior to launching PHS, Shanghai Telecom had approximately 20,000 subscribers on its CDMA1900 WLL service. These subscribers will be moved to the PHS network by the end of this year.


Mobile Data services in regional areas

Sichuan Telecom started commercial trials for "Mobile QQ", a Chinese P2P chat service akin to MSN Messenger, in mid-May. The service will allow subscribers to use PHS SMS to communicate with QQ subscribers on PC platforms. Tencent, which offers the service, has been one of the largest mobile data providers for both China Mobile and China Unicom, but this is the first time it will offer QQ on a PHS platform. Sichuan Telecom will likely charge a monthly fee of RMB 4.5 for the service.

In other mobile data news, Tianjin Netcom launched the color ring back tone service in mid-May charging a tariff of RMB 3 per month. Guangdong Telecom also announced its intentions to launch a PHS Color Ring-Back service soon, but timing and other details are still unclear.

Guangdong Telecom and Beijing Netcom are testing PHS location based services that are expected to be launched by the end of this year.


Handset/Equipment Vendors

UTStarcom announced new contract

UTStarcom announced in April that it signed a contract worth approximately USD 22 million with China Telecom to expand and optimize the IP-based PAS network in Fujian Province. The contract also includes the supply of additional PAS handsets to meet growing subscriber demand in the province. UTStarcom also announced a contract valued at approximately USD 20 million with China Telecom to expand and optimize deployments of its IP-based PAS network in Shaanxi Province. The contract is the fourth major iPAS network expansion in Shaanxi since it was first deployed in 1999.


Dual-Mode Handsets Loom on the Mainland's Horizon

UTStarcom said it has jointly developed a PHS/GSM dual-mode phone, UT828, with domestic handset maker Eastcom. Eastcom designed the handset's GSM components, while the handset itself is branded as UTStarcom. By partnering with Eastcom, UTStarcom can manufacture GSM handsets without a license. The MII is no longer issuing GSM handset manufacturing licenses.

The handset's commercial launch may still require MII approval ('Ru Wang Zheng' / network certificate) and testing by mobile operators. UTStarcom began selling GSM/PHS dual-mode handsets in Vietnam in late February, and plans to launch them in Taiwan soon.

By launching dual-mode handsets in these markets, UTStarcom hopes to convince MII and Chinese operators of their technical and commercial feasibility.

Another dual-mode handset, the SANYO GR1000, is reported to be available in Guangdong.


3G

China is likely to further delay issuing 3G licenses until 2H 2005.

3G licensing is likely to be further delayed due to poor interoperability in the ongoing 3G trials. Previously, it was widely believed that 3G licenses would be issued in early 2005.

Mr. Wen Ku, Director General of MII's Science and Technology Department in charge of the MTNet 3G trials, said in an industry conference on June 1st. "With two phones, after you insert a SIM card and make a video call, they don't work. In one, you could hear the voice but not see the picture, in the other you could see the picture but not hear the voice." Wen Ku also complained about the lack of 3G handset models for the trial.

China Mobile is now increasingly concerned that delays in 3G licenses will give China Unicom the opportunity to target high-volume data users with superior speeds offered on its CDMA 2000-1X network, churning off GPRS. As a result, China Mobile is lining up EDGE suppliers with contracts reportedly signed and deployment subject to delays in 3G licensing being confirmed.