2012 China - Telecoms, Mobile, Broadband and Forecasts

Accelerated investment in FttX and Wi-Fi as mobile data soars

China outperformed all other major economies in 2011 although GDP growth slowed to 9%. The government vowed, in the 12th Five-Year Plan released in March 2011, to continue reforming the economy and emphasised the need to increase domestic consumption in order to make the economy less dependent on exports for GDP growth.

According to the International Monetary Fund, China’s share of worldwide GDP is to grow from 1.7% in 1991 to 11% in 2014. This highlights the massive change underway in China. Telecommunications is an important vehicle to drive through this radical shift in economic prosperity and culture.

China’s entire telecommunications market generated around  US$160 billion in 2011. It is the second largest telecoms services market in Asia Pacific after Japan. The market is expected to increase at a compound annual growth rate of 8.8% between 2009 and 2014, reaching US$187 billion by 2014, surpassing Japan as the largest telecommunications market in Asia.

The market experienced a settling in period after the government initiated industry restructure in 2008. China Mobile is still the dominant player but the 3G space sees a more equitable distribution of market share. The mobile sector is still expanding at over 15% per annum and 3G services are starting to gain momentum supported by a more mature value chain. Confronted with a continuous decline in the fixed-line market, the government has again intervened to set aggressive targets for broadband services. China became the leading country in the number of Digital Subscriber Line (DSL) users in 2003 and by 2010 was the leading country in terms of FttX deployment.

There is rapid development of internet businesses in China as the digital economy takes shape. The pace of development has escalated as more and more of the population gain access to the internet. Chinese based online enterprises can target consumers like no western company has been able to do and numerous successful IPOs on the NYSE are testament to this. Internet users have exceeded the 550 million mark, increasingly accessing web sites via mobile phones.

China continues to build a substantial world-class telecommunications infrastructure and the investments show no sign of abating. As data traffic grows, the major operators are keeping pace by increasing both domestic and international connectivity through submarine and terrestrial cable links. The country also has high aspirations with its space program and has developed a local industry to develop, build and deploy communications satellites.

China is at the forefront of technology development, strongly supported by all levels of government. Amongst these initiatives are Cloud Computing and Smart Grid deployments and the building of Smart Cities that support the government’s climate change targets set out in the Twelfth Five Year Plan.

Market highlights:

• China had close to 1,300 million phone users by mid-2012, including mobile phones, fixed-line phones and PHS handsets. Mobile subscribers comprised over 80% of the total.
• Non-voice revenue comprised over 40% of total industry revenue and value added services comprised over 25% of total industry revenue.
• Internet access conditions improved in rural areas as more provinces and municipalities moved into the first echelon of internet development.
• Broadband investments increased particularly with FttX infrastructure, driven by government initiatives.
• Nascent IPTV growth was impacted by the government announcement of three-network integration trials of the country’s telecom, broadcast television and internet networks.
• Mobile TV was introduced using the local China Multimedia Mobile Broadcasting (CMMB) mobile TV standard.
• Large scale LTE trials continued even though 3G deployments still have to reach critical mass, and government statements that 4G operations will only be approved in 2014.

China – Key performance indicators – 2010, 2012 (e)

(Source: BuddeComm based on industry data and BuddeComm forecasts)

For those needing high level strategic analysis and objective analysis on China, this report is essential reading and gives further information on:

• Aims by the government to broadcast all TV programs in digital format by 2010 and complete cable TV digitisation by 2015.
• State Grid Corporation’s goal of building out a Smart Grid by 2020 as part of the country’s US$100 billion investments in Smart Grids.
• The establishment of the State Internet Information Office agency to oversee internet information and to direct development of online gaming, online video and audio businesses, and online publication industries.
• China’s Twelfth 5 year plan targeting seven priority industries with the aim of increasing their GDP contributions from 2% of GDP to 8% by 2016 and supported by a budget allocation of RMB 10 trillion (US$1.52 trillion) over the five year period.
• Successful NYSE IPOs of Chinese online companies which are still to see profitability.
• A substantial decline in basic internet resources as the government cracks down on illegal operations;
• A noticeable shift to instant messaging, blogging and microblogging and increased use of the internet for currency transactions.