Telecom industry on a roll

By Li Weitao (China Daily)
Updated: 2006-12-04 08:52
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"Compared with other industries such as manufacturing, aviation and railways, the pre-tax profits in the telecom industry have always been much higher."

That is largely due to the ever-growing and robust demands for telecom services in the country, whether they are fixed-line services, mobile phone services or even the limited mobility PHS (Personal Handyphone System) services.

For instance, although China has become the world's largest mobile phone market, a large portion of the population has yet to own a phone.

"China is (still) an emerging market because there is a lot of potential for new penetration," said Olli-Pekka Kallasvuo, chief executive officer of Nokia, the world's largest cellphone maker.

Kallasvuo predicted the number of China's mobile phone subscribers would hit 600 million by 2010, which could unleash big opportunities for operators as well as manufacturers of telecom equipment and handsets.

And even in the big cities where mobile phone penetration is nearing saturation, a big number of mobile phone users are replacing their handsets with new ones with advanced features.

Nokia estimates that the replacement market accounts for about 55 per cent of the total handset market and the figure could grow to 80 per cent by 2010.

A recent report by a Beijing-based research house Analysys International predicted unit sales of mobile phones in China could grow at a compound annual growth rate (CAGR) of 9.38 per cent during 2006 and 2010. In 2010, 138.2 million handsets would be sold in China, it said.

Economist Lin Yifu is even more optimistic. "By 2020, 80 out of 100 people in China will own a mobile phone," he said, adding total mobile phone subscription would hit 1 billion by 2020.

That will form a cellular market even bigger than a combined market of the United States, Japan and Europe.

By October, mobile phone penetration in China stood at 33.9 per cent.

"The continuing dropping prices of both mobile phones and telecom fees would make it possible (to grow the number of mobile phone users to 1 billion by 2020)," said Lin.

The economist predicted that China would maintain an annual economic growth of 9 per cent in the coming 15 years, while consumption would grow no less than 7 per cent each year.

A significant number of money would be spent on telephone services. "Personally I expect China's per capita GDP (gross domestic product) to reach US$6,320 by 2020 (compared to a government's forecast of US$3,000), if we take the possible appreciation of Renminbi in the coming years into consideration," said Lin, adding the income increase will result in increasing demands for content-related telecom services as well as higher value-added services.

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