• United States
by Dan Nystedt

Chinese prefer mobile phones over landlines

Mar 27, 20064 mins
Network SecurityTelecommunications Industry

Chinese users favor mobile phones over landlines.

Chinese users prefer their mobile phones over landline calling by a growing margin, a trend that is showing up in earnings for Chinese telecommunications companies and government statistics.

Convenience, easy access to low cost handsets, the status of talking on a mobile phone and pure necessity for work are all reasons why Chinese users prefer mobile phones, analysts say, and the gap between those with mobiles vs. landlines continues to widen.

Government statistics bear this out. China had 393.4 million mobile phone users at of the end of last year, and only 350.4 million landline subscribers, according to China’s Ministry of Information Industry.

The growth in mobile use comes despite changes at China Telecommunications that might have favored additional landline use. In the past, one thing that held back growth in landlines – and a fast way to connect to the Internet via the telephone line – was the cost of a phone hook-up, but a few years ago China Telecom did away with the connection fee users had to pay, according to William Li, a company spokesman.

Even that hasn’t slowed the trend toward mobile phones, however. Earnings from China’s major telecommunications companies, which all reported their full year 2005 earnings at of the end of last week, bear out the trend.

China Mobile (Hong Kong), the world’s largest mobile phone service provider and operator of the largest GSM network in China, reported that revenue for 2005 rose 26% to 243.04 billion renminbi ($30.1 billion as of Dec. 31, the last day of the period being reported), compared to 192.4 billion renminbi the previous year. Net profit increased 28% to 53.5 billion renminbi.

The company added a net 3.5 million new subscribers per month to its billing rolls to year-end at 246.7 million, up from 204.3 million in 2004, it said. Analysts have pointed out that the figures refer to the number of Subscriber Identity Module (SIM) cards sold, and since some people carry more than one mobile phone they don’t necessarily represent individual users.

By contrast, China Telecom, the largest fixed-line service provider in China, added just 23.45 million new users last year, to a total of 210 million. The yawning gap between its users and those of China Mobile illustrates the Chinese preference for mobile phones over land lines.

China Telecom has been paying attention to the trend. It’s been promoting its Personal Handyphone System (PHS), a type of mobile phone system used mainly in Asia and South America, to latch on to growing wireless voice and data use. The company said its PHS users totaled 57 million at the end of 2005, but it didn’t give 2004 figures.

China Telecom’s revenue grew 6.4% last year to 162.5 billion renminbi ($20.14 billion as of Dec. 31), while net profit increased 8% year-on-year to 21.1 billion renminbi. Both figures grew at a far slower rate than China Mobile’s.

“In 2005, our big challenge was to start the shift from telephony to information services,” company spokesman Li said. China Telecom is also profiting from short messages and ringtones with its PHS mobile system.

China Netcom Group (Hong Kong), the main fixed line telecommunications rival to China Telecom, is also dabbling in PHS, with a total of 27.3 million mobile subscribers as of the end of last year. The company’s fixed line subscribers totaled around 88 million at the end of last year.

The company remains much smaller than its competitor, however. Full year revenue at China Netcom rose 6% from a year earlier to 87.23 billion renminbi ($10.8 billion as of Dec. 31), while its net profit was 10.5 billion renminbi.

China Mobile’s main rival in the cellular phone service business is China Unicom., which ended last year with 127.8 million users. Long held back by the cost of running a Code Division Multiple Access network alongside its GSM one, China Unicom at least reported that revenue from CDMA grew at a fast clip, up 65% over the previous year, compared to a 16% gain for GSM. CDMA is used globally.

The company said the number of people using CDMA in China rose to 32.7 million in 2005, up 4.9 million from a year earlier, while it added 10.8 million GSM users for a total of 95.1 million.

China Unicom’s revenue during 2005 increased to 87.05 billion renminbi ($10.8 billion as of Dec. 31), from 79.09 billion renminbi a year earlier. Its net profit rose nearly 10% to 4.93 billion renminbi.

The company will continue to focus on value-added services such as ringtones and simple messages, as well as pushing GPRS in some of China’s bigger cities.