Wang Jianzhou, chairman and CEO of China Mobile Ltd, speaks at the company's 2009 annual results briefing in Hong Kong Thursday. Edmond Tang / China Daily

As competition takes its toll, shift to "Blue Ocean" strategy planned

China Mobile has pinned its hopes for business growth on "Blue Ocean", or new markets, after the world's largest mobile operator by users posted huge profits, but its smallest profit growth in recent years, due mainly to fiercer competition.

To this end, China Mobile Chairman and CEO Wang Jianzhou also said the firm will unveil its fourth-generation (4G) technology during the Shanghai World Expo in May and will launch its trial run in three cities.

The telecom carrier Thursday reported a net profit of 115 billion yuan in 2009, up only 2.3 percent from the previous year.

The small growth rate - compared with the double-digit-growth trend in recent years - was mainly attributable to narrower profit margins as a result of higher handset subsidies and a lower ARPU (monthly average revenue per user) after the industry regulator allowed more competition in the market.

Net profit margin declined to 25.5 percent in 2009 from 27.3 percent the previous year, while ARPU dropped to 77 yuan from 83 yuan in 2008 after rivals China Telecom and China Unicom rolled out their own high-speed networks to compete for the same customer groups.

However, Chairman and CEO Wang Jianzhou believes there are still some growth opportunities in the giant's operations.

"We believe in growth through making new markets, in line with the strategy popularly known as the 'Blue Ocean Strategy'," Wang said.

The "Blue Ocean Strategy", a business strategy preached by INSEAD management gurus W Chan Kim and Renee Mauborgne, is based on a theory that says enterprises can generate high growth and profits by creating new demand in an uncontested market space, or a "Blue Ocean", like Columbus' "New World" across the Atlantic, than by competing head-to-head with rivals in an existing market.

China Mobile's strategic investment in Shanghai Pudong Development Bank (SPDB) could prove to be one of the Blue Oceans, Wang said. On March 10, China Mobile entered an agreement with SPDB to acquire a 20 percent stake in the latter.

"The cooperation between the group and SPDB signifies the exploration of a closer integration between mobile communications and e-Commerce applications," he said.

"We believe this cooperation will open up a new market for both parties and result in a win-win situation," he added.

Wang also sees growth spots for China Mobile in rural areas and the household-user sector, both of which still have great potential.

He also said the company will continue to look for investment opportunities in the overseas telecommunications sector and will seek new avenues of growth in international markets.

Meanwhile, Vice-president Li Yue told a press briefing Thursday that there is still "huge potential" in the company's businesses. "We will boost our efforts in business expansion in 2010," he said.

(HK Edition 03/19/2010 page2)