2015 China - Telecoms, Mobile and Broadband

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Last updated: 14 Dec 2015 Update History

Report Status: Archived

Report Pages: 117

Analyst: Paul Kwon

Publication Overview

China’s telecom market still has low penetration rates and this is an excellent indicator for future growth. The report covers trends and developments in telecommunications, mobile, internet, broadband, digital TV and IPTV developments. Subjects include:

  • Market and industry analyses, trends and developments;
  • Facts, figures and statistics;
  • Industry and regulatory issues;
  • Infrastructure;
  • Major players, revenues, net profit, EBITDA, subscribers, ARPU;
  • Internet, VoIP, IPTV;
  • Mobile voice and data markets;
  • Broadband (FttX, DSL, cable TV, mobile);
  • Smart cities;
  • Cloud computing and data centres;
  • Smart grids;
  • Scenario forecasts for internet users to 2026, fixed-line to 2018, broadband subscribers to 2018.

Researcher:- Paul Kwon
Current publication date:- December 2015 (21st Edition)

Executive Summary

China’s massive telecoms and digital market steams ahead

China’s telecom market is the largest in the world in many respects but is served by only three operators; China Telecom, China Unicom and China Mobile. All three are integrated providers of telecom services although China Mobile is the largest in the crucial mobile market.

China’s fixed-line market is in decline due to voice mobile substitution although the two main fixed-line operators of China Telecom and China Unicom have aggressively deployed and marketed fibre broadband to increase the value of maintaining a fixed-line. Mobile subscriptions outnumber voice and voice is giving way to data as the primary revenue generator.

China boasts the largest broadband subscriber base in the world, with the majority of users accessing the Internet through mobile devices. Despite high broadband penetration China possesses one of the slowest broadband speeds globally although this should change in 2016 following network architecture improvements such as the October 2015 completion of a two year project to increase the number of nationwide Internet traffic hubs from three to ten.

DSL was the initial driving force behind fixed broadband growth in China, followed later by EPON fibre and now GPON fibre. HFC makes up a tiny proportion of total broadband connections as despite the fact that China also possesses the largest cable TV subscriber base in the world, cable TV operators were late in upgrading cable TV networks with the necessary infrastructure, missing a significant slice of the country’s rapidly expanding fixed broadband market.

With the world’s largest online population, China’s digital economy rapidly grew to cater to the needs of the online masses. Much of the initial growth in China’s digital economy was underpinned by the online demand for information, media and commerce, giving rise to China’s three domestic digital economy giants; Baidu (search), Alibaba (e-commerce) and Tencent (social media). Traditional media players largely struggled to keep pace with the migration of audiences to online media, while China’s telcos missed the opportunity to develop into digital giants as they focused on deploying fixed and mobile broadband networks.

Also evolving within China’s digital economy to meet the needs of China’s online audience are the banking and financial services industry, public administration services, health services and education services.

China’s digital economy will continue to grow as only half of China’s 1.4 billion people are online. This online audience is growing wealthier due to China’s consistent macroeconomic growth and demographic trends such as ongoing urbanisation. As a consequence China’s online audience is increasingly willing to spend online, a trend encouraged by the government as it seeks to balance the economy away from an overreliance on building infrastructure and exporting goods towards domestic consumption.

The fate of China’s traditional media players is largely secure given that they are government owned and hence seen as an integral part of the government’s desire to control the media. The competition for audience share and hence revenue between privately and state-owned operators reflects the same competitive challenges faced by state-owned operators in other industries in China’s evolving economy.

Although China boasts the largest mobile market in the world, there is still much room for growth given the relatively recent focus on large scale LTE investment. China Telecom, China Mobile and China Unicom operate a variety of technology platforms that reflect the commercial preferences of operators and the industry development policies of China’s government.

Entering 2016 all three mobile network operators are focused on deploying LTE networks and monetizing such investments by enticing end users to upgrade to higher ARPU LTE products such as mobile broadband.

Operators are also investing in technologies design to maximise the user experience such as Rich Communication Service (RCS), Voice over LTE (VoLTE) and Near Field Communications (NFC).

Given the size of China’s mobile population and its position as a “mobile first” country, it is not surprising that China possesses a vibrant mobile content and applications industry, with China overtaking the USA in terms of iOS app downloads in 2015. Growth is only set to continue given the relatively low penetration of LTE smartphone handsets.

Key Developments:

  • China’s government strengthens IOT policies to boost economic growth
  • China’s government further opens the telecom market to private companies
  • China possesses the world’s largest M2M market with significant growth evident in the connected car market.
  • The Majority of China’s online audiences accesses the Internet via mobile
  • Fibre has overtaken DSL to become the key fixed broadband technology platform
  • Internet speeds double after China completes a two year project to increase the number of national Internet hubs from three to ten.
  • China’s big digital giants are consolidating their position by branching into non-core areas through investments in China’s many start-ups, some of which were launched by ex-employees, mirroring the trend that developed Silicon Valley’s start-up ecosystem.
  • China’s broadcasters are under threat as audiences shift from traditional broadcasters to online media platforms operated by new players.
  • ·         The TV is expected to become one of the biggest battlegrounds for China’s digital giants as its role evolves into a dedicated hardware interface into one of China’s many developing “walled garden” digital ecosystems.
  • China’s largely state-owned CATV industry is undergoing consolidation to capture the economies of scale that was not possible through operating thousands of smaller CATV operators.
  • China’s massive online population allows a number of social media platforms to flourish, a number of which have pivoted towards e-commerce in order to monetize traffic.
  • China’s digital economy is yet to reach its full potential as just over half of the population is online.
  • China Telecom and China Unicom are focusing on LTE-FDD deployments after finally receiving the necessary licences
  • LTE subscribers expected to surpass 3G subscribers by 2016
  • LTE drives almost double the amount of data used compared with 3G
  • Mobile is the most popular Internet access method in China
  • China possesses the largest M2M market in the world
  • To cut costs China’s operators have pooled assets into a Tower sharing joint venture company
  • Increasing focus on mobile apps by China’s digital media giants due to the proliferation of mobile phones and LTE
  • China overtook the USA in terms of iOS app downloads.

Companies covered in this report include:

China Mobile, China Telecom, China Unicom, Alibaba, JD.com, Baidu, Tencent, SINA, Weibo, Sohu, Xiaomi, Meilishuo, Mogujie, RenRen, China Central Television (CCTV), Youku, Iqiyi/Qiyi, V.QQ.com, BesTV, UnionPay, Apple Inc.

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