Posted on 01/01/2002 12:22:02 PM PST by super175
Mobile phone operators China Mobile and China Unicom face challenges this year with a market slowdown and greater competition.
Although the number of mobile phone users in China doubled in 2000 and grew strongly last year, analysts say the country cannot sustain such growth in the coming years.
The Ministry of Information Industry, the telecommunications regulator, predicts mobile phone use will hit 290 million by 2005.
With 139.9 million users as of November, the growth rate is likely to slow to an average 37.5 per cent in the next four years.
According to the regulator's latest data, only 3.9 million new mobile subscribers signed up in November, against a monthly average of about five million for the year.
The slow take-up of new subscribers will mean a slowdown in earnings growth for the two mobile operators.
According to Multex Global Estimates, analysts forecast the growth rate of China Unicom's net profit to slow from an estimated 102.5 per cent for last year to 19.2 per cent this year.
Life for dominant player China Mobile could be even more difficult as it is losing market share to rival China Unicom. The country's cellular market is dominated by predominately price-sensitive low-end users.
Multex Global Estimates reported analysts' consensus projections for China Mobile's net profit growth this year was only 7.3 per cent, in contrast to an estimated 49 per cent profit growth rate last year.
The consensus estimate for China Mobile's net profit last year was 26.86 billion yuan (about HK$25.65 billion), while this year it was 28.84 billion yuan.
"China's telecoms sector is pretty much a low-end market. China Unicom is in a position to snatch market share from China Mobile," said Marvin Lo of BNP Paribas.
By offering services at about 10 per cent less than the tariffs charged by China Mobile, China Unicom has been successful in gaining market share.
BNP Paribas forecasts China Unicom's mobile subscriber numbers to increase by 45 per cent to 39.5 million this year, boosting its market share to about 32 per cent from about 27 per cent now.
"The slow increase in subscribers won't be enough to offset the fast drop of per-user revenue and, therefore, we expect China Mobile's net profit to drop by 8 per cent in 2002," Mr Lo said.
BNP Paribas predicts China Mobile's subscribers will increase by 19 per cent to 80 million this year.
However, the brokerage firm forecasts China Mobile's average revenue per user to drop from 240 yuan in September to 109 yuan by the end of this year, representing a 54.58 per cent drop over five quarters.
Analysts believe China Mobile needs to rely on acquisitions to sustain high earnings growth. Last month, it announced a plan to acquire eight provincial networks from its parent, China Mobile Communications.
China Mobile was under pressure to complete the acquisition in the first half to achieve satisfactory earnings performance for the year, they said.
Many analysts preferred China Unicom over China Mobile because it had a stronger organic growth picture. They believed China Unicom would still achieve a double-digit earnings growth rate even without acquisitions.
The company's plan to acquire the remaining 19 provincial networks from parent China Unicom Group would be a bonus to China Unicom's earnings.
China Unicom's biggest challenge for the coming years is whether its CDMA (code division multiple access) mobile networks will be successful in snatching high-end users from China Mobile.
Another challenge for both operators is an increase in competition from fresh entrants when Beijing grants new mobile licences later this year following the completion of the break-up of China Telecom into northern and southern entities.
It is widely expected both the northern and southern entities - to be called China Netcom and China Telecom - will gain mobile licences before the end of the year, which would make an already difficult business even harder for China Mobile and China Unicom.
Getting this out in the open while they still can...
The Ministry of Information Industry, the telecommunications regulator, predicts mobile phone use will hit 290 million by 2005.
Never underestimate the power of a book cooker.
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