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other hand, Growth rate of PHS subscribers is slowing down,
due to the limited investment of operators and price cut on GSM phones.
2. 3G license Update
3G license may be delayed to 2008 with speculations of
further delays. TD-SCDMA is a certainty with license to be issued first. Reshuffle of
operators may happen before 3G and will likely to occur in 2007 driven by SASAC's
initiative on industry consolidation. Final decision will be made on national conference
of the People's Congress and Political Consulting Committee. BDA predicts the
restructuring scenario that China mobile will get the license of TD-SCDMA, and China
telecom, granted license to operate CDMA 2000 1X EVDO
, and China Unicom and China Netcom to run W-CDMA. Because China
Government is devoted to promote TD-SCDMA, which is the 3G originated in China, it will be
reasonable to let China mobile, which has the most subscribers in China and holds biggest
potentiality for investment, to build TD-SCDMA. China Mobile has planned to start TD-SCDMA
pre-commercial trial at major six cites including Beijing and Shanghai, and five new cites
including Guangzhou and
Shenzhen. However lack of terminals variety is still one of the main bottlenecks to
prevent TD-SCDMA from the public choice.
3. PHS Market
The number of PHS users is 91.1 million, however, its
growth slowed in 2006 due to the continued drop in mobile price. PHS has been losing its
price advantage since 2006. Starting in 2005, PHS accumulated revenues exceed total capital
investment. With capital investment slowing down, revenue exceeds new network investments
by RMB 24.9 billion in 2005. PHS drives fixed-line user growth and fights mobile fixed
substitution for fixed-line carriers. For the Operator such as China Telecom and China
Netcom, PHS contributes to the increase in shares of total revenue, driven by VAS and
fast-growing user base. PHS operators promote SMS and CRBT to increase VAS revenue, while
other VAS is still limited in scale. PHS SMS and CRBT will be revenue growth drivers,
producing strong revenue return for carriers.
4. Fixed line Operator and FMC
Both China Telecom and China Netcom have got flat
revenue growth in Q3 2006, pressured by mobile substitution. China Telecom reports slow
user growth, China Netcom's PSTN user declined for the first time and China Netcom lags
behind China telecom in broadband and CRBT user growth in Q3 2006.
For both China Telecom and China Netcom, VAS will act as
strong revenue earner in future. Basic VAS like caller ID, SMS and CRBT are still the
mainstream service. One the other hand, convergent services are emerging, which fixed-line
carries take the lead. Home Box, which integrates PHS with PSTN phone as well as broadband,
is an initiative for FMC service offered in carriers' bundled packages. Its trials were
launched in July 2005 and commercial offering began in May 2006, totaling 1 million users
by year-end 2006. China Netcom also provides bundled packages for PSTN, PHS and broadband
with its brand as 'Qingqing 1+'. China Netcom began offering Homebox or 'Qingqing 1+'
in 2006, and will expand it to 10 provinces in North China in 2007. China telecom also
plans to develop bundled packages on family basis in 2007.
5.Key Success factors for PHS
BDA would like to conclude the key success factors for
PHS as follows:
Drive down the cost of PHS handsets and equipments to offset declining network
investment and mobile handset price.
Promote more low-cost vale-added service, such as data card to attract users
Develop more enterprise applications with operators or other partners to approach
corporate customers.
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