1、CONFIDENTIALChinas Mobile Telecom ServicesIndustry OverviewGCO Practice DevelopmentMay2002ThisreportissolelyfortheuseofFirmpersonnel.Nopartofitmaybecirculated,quoted,orreproducedfordistributionwithoutpriorwrittenapprovalfromMcKinsey&Company.ACKNOWLEDGEMENTS AND REFERENCESMGMs and CSS involved in the
2、 relevant studies include the following:TonyPerkins(BEI)StefanAlbrecht(BEI)ChipperBoulas(HKO)PeterKenevan(TOK)PerchowJosephChang(SHA)AndrewWu(HKO)HaiWu(BEI)JaneXing(HK)YiFeng(BEI)ShengFLi(SHA)YoshinobuTakanuki(TOK)GraemeHunter(JOH)JuliaYang(BEI)EricXu(BEI)JasonLiu(BEI)ShirleyChen(BEI)The series of P
3、Ds include the following:#ChinaMacroeconomicEnvironment#ChinasMobileTelecomServiceIndustryOverview#ChinasInternetIndustryOverview#ChinaTelecomEquipmentandServicesOverview#ChinasMobileHandsetSectorOverview#ChinaTelecomIndustryRegulatoryOverview#KeySuccessFactorsandCaseStudiesofMNCsEntrytoChina202PDCh
4、inaMobileTelecomsServiceIndustry020403.pptKEY MESSAGES1.Chinasmobiletelecomservicemarketishugeandfastgrowing,representingUS$21billionmarketsizein2001andUS$38billionin2005.Thismarketissupportedbytheworldslargestsubscriberbaseat145million,alreadycomprising15%oftheworldstotalin2001andgrowingtopotential
5、ly218millioninalowcaseor300millioninahighcaseby20052.ThecompetitivelandscapeformobileserviceshasevolvedfromasingleregulatorandoperatortotodaysduopolyofChinaUnicomandChinaMobile,bothofwhomareunassociatedwiththeMinistryofInformationIndustries.AsecondbreakupofChinaTelecomisexpectedtoformtwolargetelecom
6、operators,ChinaTelecomandChinaNetcomGroup,whoarelikelytoreceivemobilelicenses.Afifthtelecomoperator,ChinaRailcom,alsohasthepotentialofreceivingathirdgenerationlicenseandbuildingamobilebusiness.Fornow,ChinaMobiledominatesthemarketwith82%valueshareand72%subscribershareandownsmuchofthehighvalueuserbase
7、.Howeverchurnisalreadyhighandisexpectedtoincreasewithcontinuingpricingpressuresandincreasedcompetition.3.WirelessdataservicesareexpectedtogrowquicklyinChinatoamarketofpotentiallyoverUS$4billionby2005,usedby43%ofallmobileusers.Interestfromconsumersurveyshavebeenhighandoperatorsandotherplayersareactiv
8、elybuildingservicesinthemarket.WhileearlyWAPserviceshavefailedtocatchon,SMShasgrownexponentiallywithupto20billionSMSmessagesin2001.Theearlyadopterswillbemobileprofessionalsandmodernyouth,whowillrequireservicesanddevicestailoredtotheirneeds.4.Regulatorychangesloom,particularlywiththeaccessionofChinat
9、otheWTO.WhileforeignerswillbeunlikelytosetupMVNOs,WTOwillallowgreaterparticipationofforeignersinbasicandvalueaddedservices,althoughgeographiclimitationswillexistthrough2004andChineseplayerswillberequiredtoownatleast50%oftelecomserviceventures(51%forbasicservices).Regulatoryrisksremain,withnomeanstoa
10、ppealregulatordecisions,unclearinterpretationofregulationincludingWTOcommitments,andthegovernmentstrackrecordofintransparentandunpredictabledecisionmaking.(SeeseparateregulatoryPDfordetails)Appendix Playersprofiles 3Gtechnologystandardschoices302PDChinaMobileTelecomsServiceIndustry020403.pptKEY MESS
11、AGES1. Chinas mobile telecom service market is huge and fast growing, representing US$21 billion market size in 2001 and US$38 billion in 2005. This market is supported by the worlds largest subscriber base at 145 million, already comprising 15% of the worlds total in 2001 and growing to potentially
12、 218 million in a low case or 300 million in a high case by 2005402PDChinaMobileTelecomsServiceIndustry020403.ppt1997-2001 MOBILE SERVICE REVENUE GROWTH OF 30% CAGR HAS OUTPACED OTHER TELECOM SERVICE SECTORS AND IS PROJECTED AT 16% THROUGH 2005RevenuesUS$BillionsCAGR vs. other industries (1997-2001)
13、PercentMobileFixedlinePagingCAGR30%CAGR16%Source:DeutscheBank;McKinseyanalysis502PDChinaMobileTelecomsServiceIndustry020403.ppt*RevenuesdonotequaltheproductofARPUassubscriberfiguresareprovidedforyearend,notaveragesubscribersduringayear.Detailedinformationonthetimingofnewsubscriptionsandchurnrequired
14、forthecalculationofaveragesubscribersduringagivenyearisnotavailable*AllCAGRsarecalculatedontheannounceddataSource:DeutscheBank;JPMorgan;MIIEXTRAORDINARY SUBSCRIBER GROWTH IS THE PRIMARY DRIVER OF REVENUE EVOLUTION, MORE THAN MAKING UP FOR LARGE DECLINES IN ARPU DUE TO STIFF COMPETITIONMobile revenue
15、s* $BillionsNumber of subscribers low case MillionsCAGR 30%CAGR 16%CAGR 83%ARPUUS$/monthCAGR -24%CAGR -7%PenetrationinitiallylowGovernmentbackingforincreasingsubscribernumbersRelativelylowfixedlinepenetrationLow-endprepaidsubscriberincreaseDrivers Declineduetoincreasedprepaidandlowerspendingbylateen
16、trantsTariffreductionascompetitionincreasesSlightlyoff-setbyincreaseindatatrafficinlateryearsCAGR 19%20823526329117161515AnnouncedEffective602PDChinaMobileTelecomsServiceIndustry020403.ppt*05forecastuselowcase,netsubsafterinactiveandmulti-sim-cardreduction*MajorEuropeancountriesinclude:UK,France,Ita
17、ly,Germany,Netherlands,Spain,SwedenSource:JPMorgan;WEFA-WMM;MII;McKinseyanalysisJapanCHINA IS THE WORLDS LARGEST MARKET IN TERMS OF SUBSCRIBERS, HAVING OVERTAKEN THE US IN 2001USMajorEuropean*countriesCAGR = 30%CAGR = 14%CAGR = 7%Number of mobile subscribersMillionsCAGR = 13%20002005Chinalowcase*Chi
18、nahighcase*CAGR = 22%702PDChinaMobileTelecomsServiceIndustry020403.pptCHINAS MOBILE SUBSCRIBER BASE IS GROWING MORE RAPIDLY THAN ANY OTHER MAJOR MARKET, COMPRISING 15% OF WORLD TOTAL IN 2001*Afirca,EasternEurope,MiddleEast,Canada*Forecastof02-05usethehighcase,netsubsafterinactiveandmulti-sim-cardred
19、uctionSource:JPMorgan;Gartner2001;DeutscheBank;MerrillLynch;PiperJaffray19971998199920002001E2073004827279651,1781,3931,633100%=Global mobile subscribersMillionsubscribers;percentWesternEuropeUSSouthandLatinJapanandAsiaPacificChina*Restofworld*CAGR1997-2005percent2918452847452002E2003E2004E2005E1,85
20、0802PDChinaMobileTelecomsServiceIndustry020403.pptCHINAS MOBILE MARKET IS PROJECTED TO GROW SIGNIFICANTLY*02-05forecastarenetsubsafterinactiveandmulti-sim-cardreductionSource:IDCreport;JPMorganreport;McKinseyanalysisNet subscriber* additionsMillions199719981999200020012002E2003E2004E2005E10847133-98
21、-4711Annual growth Percent1237912131516PenetrationPercent47.143.946.345.75.511.516.939.435.9LowcaseHighcaseLow10847103-9225-13HighLowHigh1237912161923902PDChinaMobileTelecomsServiceIndustry020403.ppt0%5%10%15%20%25%CHINAS SUBSCRIBER BASE OF 218 MILLION IMPLIES A 47% PENETRATION OF AN ADDRESSABLE MAR
22、KET OF 460 MILLION BY 2005*Lowcase,netsubsafterinactiveandmulti-sim-cardreductionSource:JPMorgan;DRI;A;Literaturesearch;Analystreports;TeamanalysisIncome per capita(US$p.a.)2001AddressablemarketNumberofmobilesubscribersImpliedpenetrationoftheaddressablemarket2005E345mn145mn42%463mn218mn*47%China inc
23、ome distribution and addressable marketPercent1,8151,77220012005 Chinasaddressablepopulationformobileservicesisprojectedtoincreaseby8%p.a.forthenextfiveyearsto460millionin2005 Thekeyassumptionsindeterminingtheincomethresholdare: Chineseconsumerswillingtospend5-10%oftheirincomeoncommunicationservices
24、higherthantheaverageof3.5-4%formoredevelopedmarketsasagreaterportionofincomeisavailablefornon-essentialgoodsasaresultofChinasrelativelylowlivingcost Halfofthisassumedspentonmobileservices(5.5%) UnicomsprepaidARPUwilldecreasefromUSD8.3for2001toUSD8.1for2005;thereforethethresholdincomewilldropfromUSD1
25、,815(8.3*12/5.5%)for2001toUSD1,772for2005(8.1*12/5.5%)2005Addressablemarket:35%Addressablepopulation:460mnpersons2001 Addressablemarket:27%Addressablepopulation:345mnpersonsPercent of population1002PDChinaMobileTelecomsServiceIndustry020403.pptMOBILE SUBSCRIBER PENETRATION OF LESS THAN 7% IN 2000, L
26、EAVES SIGNIFICANT ROOM FOR GROWTHSource:JPMorgan;IDCreport;Gartner;Literaturesearch,EIU100%199619971998199920002001E 2002E 2003E2004E 2005EMobile subscriber penetration in 2000PercentItalySwedenNetherlandsUKSpainGermanyFranceUSChina*AllsubscribersDataservicesubscribers1,2181,2301,2421,2541,2651,2761
27、,2871,2981,3091,319As percentage of total population low case*Millions(totalpopulation)ChinaUrban*02-05forecastarenetsubsafterinactiveandmulti-sim-cardreduction*Penetrationovertotalpopulation*Penetrationoverurbanpopulation.0.61.01.92.96.68.91.12.03.97.10.412.013.415.016.41102PDChinaMobileTelecomsSer
28、viceIndustry020403.pptCHINAS RICHER PROVINCES GENERALLY HAVE MORE SUSCRIBERS AND ARE GREATER PENETRATEDPopulationMillionsPenetrationPercent,2000Subscriber CAGRPercent,1998-2000Number of subscribersMillionsProvinceGuangdongLiaoningZhejiangJiangsuShandongFujianHeilongjiangShanghaiHebeiSichuanBeijingHe
29、nanAnhuiHubeiHunanSource:ChinaStatisticalyearbook,JPMorganReport,McKinseyanalysis1202PDChinaMobileTelecomsServiceIndustry020403.pptWHILE THE POOR WESTERN AND INTERIOR PROVINCES HAVE LESS SUBSCRIBERS AND ARE LESS PENETRATED*Growthratefrom1999-2000Source:ChinaStatisticalyearbook,JPMorganReport,McKinse
30、yanalysisPopulationMillionsPenetrationPercent,2000Subscriber CAGRPercent,1998-2000Number of subscribersMillionsProvinceJilinGuangxiYunnanShaanxiChongqingShanxiTianjinInnerMongoliaJiangxiGansuXinjiangHainanNingxiaQinghaiTibetGuizhou1302PDChinaMobileTelecomsServiceIndustry020403.pptKEY MESSAGES2.The c
31、ompetitive landscape for mobile services has evolved from a single regulator and operator to todays duopoly of China Unicom and China Mobile, both of whom are unassociated with the Ministry of Information Industries. A second breakup of China Telecom is expected to form two large telecom operators,
32、China Telecom and China Netcom Group, who are likely to receive mobile licenses. A fifth telecom operator, China Railcom, also has the potential of receiving a third generation license and building a mobile business. For now, China Mobile dominates the market with 82% value share and 72% subscriber
33、share and owns much of the high value user base. However churn is already high and is expected to increase with continuing pricing pressures and increased 中国管理 网1402PDChinaMobileTelecomsServiceIndustry020403.pptCHINAS MOBILE OPERATOR LANDSCAPE HAS EVOLVED SIGNIFICANTLY, CULMINATING IN SECOND BREAKUP
34、 OF CHINA TELECOMNomobilelicensescurrentlySource:Literaturesearch;EIUPyramid;IndustryreportsChinaTelecomChinaUnicomBecamethesecondmobilenetworkoperatorinmid1994However,ChinaTelecomasthesoleproviderofbothbasicandwirelesstelephonyservicesmadeitdifficultforUnicomtogrowChinaUnicomChinaRailcomChinaUnicom
35、MinistryofPostsandTelecommunicationsCreatedin1994whenformerMPTseparatedintoregulatoryandoperatingfunctionsChinaTelecomownershiptransferredtoMinistryofFinance,withregulatoryfunctionsplacedinthenewMinistryofInformationIndustries(MII)ChinaTelecomChinaMobile(CMCC)ChinaTelecomChinaMobile(CMCC)Underthegov
36、ernmentsanti-monopolyplan,inthe1sthalfof1999,ChinaTelecomwassplitinto4operatingcompanies:CTfixed,ChinaMobile,CTPaging,CTSatelliteThechangebecameofficialonApril20,2000Priorto1994,theMPTactedastheregulatorandsoleoperatoroftelecommunicationsIn1993,announcementwasmadetoseparateoperatingandregulatoryfunc
37、tionsalongwiththeestablishmentofa2ndoperatorGreatWallEstablishedin1995toharnessPLAsradiospectrumThecompanyundertakes“theCDMAproject”atthedirectionofthegovernmentGreatWallDuetogovernmentcommitmenttoseparatePLAfromcommercialactivities,GreatWalldissolvedwithdecisiontotransferCDMAassetstoChinaUnicommade
38、inOctober2000(transferyettobecompleted)2ndlargestfixedlinenetworkEstablishedDecember2000OfferslimitedGSMserviceoveritsrailwaynetworkPre 1994 Regulator and Operator1994 to 1999Virtual Monopoly1999 To 2002 Deregulation/Breakup2002 and beyond 2nd breakupand future landscapeChinaNetcomEstablishedinSept.
39、1999withinternetbackboneLikelylicensewinnerJitongJitongSetupin1994todevelopdatacommunicationserviceBegantoofferVoIPservicesLeadingplayerinvoiceoverIPChinaNetcomGroupChinaRailcomChinaTelecombrokenupintoNorthandSouthwithCTNorthmergingwithChinaNetcomandJitongtobecomeChinaNetcomGroupChinaTelecomSouthcon
40、tinuesoperationasChinaTelecomOperatingCDMAlocalloopservicesinseveralcitiesChinaMobileunaffectedbysecondbreakup,survivingproposaltomergeitwithJitong,givenconcernsaboutconsequencesofforcedmergersforpubliclylistedcompaniesChinaUnicomunaffectedbysecondbreakup,survivingproposaltomergeitwithRailcomWhileGr
41、eatWallCDMAassettransferhasyettobecompleted,UnicomwillbecomefirstmajoroperatorintheworldwithbothCDMAandGSMservices,withlaunchofitsownCDMAnetworkin2002Operatorbiddingfor3Glicense,withopennesstowardsadoptingChinas3Gstandard,TD-SCDMA1502PDChinaMobileTelecomsServiceIndustry020403.pptSource:Literaturesea
42、rch;industryinterviewsBeforeAfter CT break-upMOST RECENT BREAK-UP OF CHINA TELECOM TO LEAD TO A LANDSCAPE OF 5 OPERATORS COMPETING ACROSS BOTH MOBILE AND FIXEDLicensesLicensesAnnouncementonNovember26tomergeJitongwithChinaNetcomandChinaTelecomNorthernunitCompetitionwillincreaseasmergedtelecomgiantsob
43、tainlicensesforcomprehensivetelecomoperations,including Fixed-linephone Mobilephone Internet-relatedservicesOriginalplantomergeChinaMobilewithJitongandChinaUnicomwithChinaRailcom,metwithstrongdissentfromthecapitalmarketswhosawthisasanaffronttoChinaMobileandChinaUnicomsgovernanceaspubliclyheldcompani
44、esMobileMobileFixedMobile(GSM-R)FixedFixedFixedFixedGROUPChina Telecom NorthChina Telecom SouthMobileFixedMobileFixedMobileFixedMobileFixedChina RailcomChina RailcomMobileFixedHavelicense1602PDChinaMobileTelecomsServiceIndustry020403.pptPROFILES OF CURRENT AND LIKELY FUTURE PLAYERSChina assetsMobile
45、 strategyCurrent partnershipsLicense prospects*Stilltobedecided96millionmobilesubscribers30millionmobilesubscribersServicescoveringover180citiesLargestnationaltelecomnetworkcovering2,000citiesFirstoperatortointroduceinternetaccesscards,andannouncedon-lineshoppingcardtobelaunchedin2001Internetbackbon
46、ecovering17majorcitiesStartedIPphoneservicesinJanuary20002ndlargestnetworkinChina;coveringallmajorcities(500cities)Betechnologyleader,thuseagertoenter3GFocusonhigh-endcustomersTrialingGPRSwith7vendorsStronglysupportingWAPShiftingattitudesontechnology,nowfirstplayertocoverbothGSMandCDMAFocusingattent
47、ionondevelopingCDMAnetworksTrialingGPRSwith4vendorsCompeteonserviceofferingwithexistingoperators,leveraginggovernmentandsupplierexpertiseActivewithWLLandlocalmobilityGostraightto3GifpossibleObtainmobilelicenseasquickaspossibleregardlessoftechnologystandardRolloutwirelessdataservicesevenifitmeanstaki
48、ngGSM/GPRSfirstMayfocusinitiallyonGZ,BJ,SHLikelyintendsfollowing2-tierstructure Obtain3Glicensetotargethigh-endusers Use2GPHStotargetvoicesubscribersVodafoneHPHutchisonKDDISKTelecomTelstraAT&TJapanTelecomBritishTelecomNewsCorporationGoldmanSachsSingTelNoneExistingExistingCurrent playersChina MobileC
49、hina UnicomLikely future playersChina TelecomChina NetcomChina Railcom*Governmentlikelytogrant2licenses;undecidedwhen,andwhattype;nonetobeawardedin2001Source:PiperJaffrey;MerrillLynch;Literaturesearch1702PDChinaMobileTelecomsServiceIndustry020403.pptOTHER PLAYERS UNLIKELY TO ATTAIN MOBILE LICENSESSource:GoldmanSachs;EIUPyramid;McKinseyanalysisCentury MobileJitongForeign JV EntrantsNew telcosWho they areBasis for entryObstaclesConsortiumof10enterpriseswhohavejoinedtogethertotrytosetupmobileenterpriseSetupin1994todevelopdatacommunicationservicesPotentialJVsinvolvingforeigncompaniesNewplayersexp
