By November 2012, Chinese 3G adopters reached 220 million, 20% of the total of 1.1 billion mobile phone users, as disclosed by MIIT, Chinese Ministry of Industry and Technology Information. China Mobile, China Unicom and China Telecom take 37%, 33% and 30%, respectively, of the total 3G subscribers. Each of the three telecom operators adds more than three million new 3G subscribers in last month.
With a large user base, the three operators can hardly make a profit from 3G services. Apart from costs in infrastructure, spending in marketing, such as subsidies in smart phones sold, hinders profits. As of the first half of 2012, the three operators have invested a total of 289 billion yuan into 3G infrastructure, setting up 697 thousand base stations. In order to have more 3G subscribers, all the three operators subsidize 3G phone buyers.
The big three entered into a price war that made the profit harder. Since the growth of 2G phone users decelerated, the competition in new 3G users became a key indicator for them to fight for.
Notorious for lost connections for years, Unicom caught up with 3G services. It claims it’s the No. 1 3G brand in China, but it hasn’t seen a profit with it. Unicom hoped to break even on 3G in Q4, 2011, but it hasn’t happened till now.
According to its latest financials, in the first half of 2012, its 3G business increased 200%, making 44.5% of its total revenues; while 2G business decreased by 6.3%. The management expect to see a profit in Q4, 2012 .
ARPU of China Unicom’s 3G users were 93.9 yuan, a decrease of 19.9%. Reasons include 1) new, light users spend less than early adopters who were more likely to be heavy users; 2) China Unicom lowered prices of 3G offerings.
Same with China Mobile, Unicom’s costs include subsidies to smart phone buyers that account for 97% of the loss in telecom device sales in the first three quarters this year. In 2011, that number was even bigger than the net loss. Li Gang, vice general manager of Unicom, said subsidies are lower this year, from 50% to 20-30%.
The management believes profits will mainly come from data consumption. They plan to expand to rural areas and upgrade network speed in order to have a bigger market share. To get more 3G subscribers, its newly established e-commerce platform sells low-price 3G phone numbers. It also partners with brick-and-mortar electronics stores in order to get more penetration.
With the biggest number of 3G users, 8.1 million, China Mobile made the least in revenue compared with the other two operators. It also hasn’t profited from 3G offerings, while it’s the most profitable telecom operator around the world in 2011.
With its own TD network, China Mobile accounts for half the total investment in 3G infrastructure. Plus the subsidies the company provides to mobile phone buyers, Mobile has spent hundreds of billions RMB into 3G. The prices of its 3G offerings also lowered in the past year.
The growth of newly added 2G users declined to a new low level in November. At the same time, it started building its own 4G network, TD-LTE, from the second half of this year, planning to build 180 base stations and start deploying it in 100 cities in 2013, with a total of 180 billion yuan in investment.
- Fruit Ninja Partners With China Mobile To Offer China Market-Tailored Game;China Telecom To Release Mobile IM YiLiao With Free Voice Messaging
- China Mobile – losing its influence
- Alibaba, Tencent to Release Smart Phone
Link to full article