Saturation point for mobiles?

China Mobile employees promoting sales of mobile phones at a university campus in Nanjing, capital city of Jiangsu province. As the number of cell phone subscriptions exceeds 1 billion in China, some industry experts say it will be a challenge for telecom carriers to further increase their sales in what may be a saturated market. [Photo/China Daily]

What's next after China hit a new milestone of having more than 1 billion mobile phone accounts? The gradually saturated market has ended the easy growth period for Chinese telecom operators. However, there is still enough room for future growth so long as companies adopt new business models and adapt to the fast-changing industry, analysts said.

The Ministry of Industry and Information Technology said in March that the total number of mobile subscriptions increased by 20.67 million during the first two months this year to hit a record high of 1.01 billion.

China is the world's first country to reach the billion landmark. The country took less than five years to double its mobile phone accounts to 1 billion, adding subscribers at a steady pace between 8 million to 12 million a month in recent years.

India in the meantime exceeded the 900 million subscription mark in February.

"The 1 billion mark does mean some saturation in China. It's a big challenge for telecom carriers," said David C. Michael, a senior partner at Boston Consulting Group.

At the end of 2011, China had a population of about 1.35 billion. At the end of February, the official count of mobile phone subscribers was 1 billion, which means almost 75 percent of Chinese people have a cell phone.

Executives from Chinese telecom operators, however, expect the figure to continue growing, as they think that it is very possible that every Chinese person will own more than one handset.

Wang Jianzhou, former chairman of China Mobile Communications Corp, who retired in March, said the mobile phone subscription number in China is on its way to 1.3 billion, the same size as the Chinese population. "Even if it reaches 1.3 billion, it will still grow," Wang said.

In the United States, the number of mobile phone accounts has already surpassed the population. While in countries such as the United Arab Emirates, the number of mobile subscriptions is more than 1.5 times larger than its population.

"In many developing countries people may not have a computer but they own a mobile phone," said Chen Jinqiao, deputy chief engineer of the China Academy of Telecommunication Research.

In addition, as companies and individuals may have two or more subscriptions each, the 1 billion figure does not indicate how many mobile phone users there are in China.

"The actual number of mobile phone users in China is far less than 1 billion. If it is true that we have 1 billion users, we've still got 300 million people that don't own mobile phones," said Chang Xiaobing, chairman of China United Network Communications Group, in an interview in March.

However, Chinese telecom operators admitted that they should change the way of doing business in the future.

"Basically, the period of easy growth for Chinese operators is over. They have to face the new environment," Michael from BCG said. In the past, the business model could be simple - just selling the SIM cards. Now the business model has started to become more complicated, he said.

The country is moving from a 2G society to a 3G society and is likely to start commercial use of 4G telecom networks in less than two years.

The fast-changing telecom environment means a potential explosion in data service businesses, as more people will be connected to the Internet via their smartphones and people use handsets not only for entertainment but also for study and work.

"If the 3G service penetration rate in China reaches 30 or 40 percent, there will be a huge opportunity for telecom companies so long as they prepare for the change in advance," said Chang from China Unicom.

The number of 3G service subscribers in China rose by 15.5 million in the first two months to reach 143.92 million. The figure is expected to exceed 300 million by 2012, which means China's 3G penetration rate is about a quarter of the population, according to a report from Beijing-based research firm Analysys International.

China Mobile Ltd, the world's biggest telecom carrier by user numbers, has already tasted initial success from data businesses. In 2011, China Mobile saw its fastest rate of revenue increase in wireless data traffic. The unit's revenue increased by 45 percent year-on-year and contributed 8.4 percent to the company's operating revenue.

"Most Chinese people still rely on mobile phones as a tool for calls and text messages. However, mobile carriers have started to offer different data services and different types of pricing to explore new revenue sources. It's just a start and we will see more coming," said Xiang Ligang, a telecom industry expert.

shenjingting@chinadaily.com.cn