CHINA Mobile

• China Mobile was the world's leading mobile communications service provider with
over 400 million customers.
• In some cities, its penetration rate was over 100% & Chairman Wang Jianzhou was
exploring ways to expand its customer base (rural penetration rate was still just
15%)
• Nearly saturated in the cities, China Mobile needed to broaden its base of
subscribers
• Wang believed that further investment in China's rural villages was a key strategy
that would help fuel growth for the future.
• The company's participation in the government-mandated Connect Every Village
project helped it in subsequently building out the value added “Rural
Information network” through its initiatives (to make its mobile phone network
more valuable to the lifestyles of China's rural population)
• Around 2,14,000 villages were still not connected and the govt was agressively
planning network rollouts at the rate of 10% per year

•
• Risks inherent in China Mobile’s rural strategy:
– Increasing costs as coverage was extended into
remote areas
– Difficulty in developing rural infrastructure
– Customers having little cash meant that profit
margins remained thin
– The monopoly no longer remained and there was
fierce competition
– Possibility of overlooking significant opportunities
in overseas markets


–
 Telecom.
Industry
Govt’s attempt to
promote
enterprise reform
through structural
changes
Telecommunications Industry
• All six operators were running profitable operations
in the next few years
• Mobile phones began to substitute residential
phones, hence fixed line carriers slowly started
loosing out
– Jan-July 2008: 10.6 million fixed line subscribers
dropped their service whereas wireless
subscriptions grew by 61 million
• Asymmetric growth as China Mobile started enjoying
advantages due to growth in mobile subscriptions

2008 Telecommunications Reform
• In 2008 a series of mergers were announced to rebalance the
industry (anticipated for over 5 years)
• The six companies were streamlined into three full service
operators
– China Mobile + China Tietong
– China Unicom + China Netcom
– China Telecom acquired China Unicom’s wireless
service(CDMA technology) & the non satellite
assets of China Satcom
• China Mobile which already had a strong position in the wireless
segment waited to respond to China Unicom & China Telecom

 Chinese Wireless Industry
Number of phones per capita(Penetration rate) in cities like Beijing &
Shanghai approached 100%, while in Guangzhou it was well over 100%
However, overall market penetration stood at 41.6%, indicating plenty of
room for further development
 Technology
• Cellular network Standards:
– 1G- Analog signals that linked to radio channels
– 2G- Digital signals that allowed both voice & data
transmission
– 2.5G & 3G- More efficient and rapid data & video transfer
• Adoption: China mostly used 2.5G (CDMA & GSM)
• China Unicom owned networks in both standards (first
operator to offer handsets which could switch between the
type of network)
• China Mobile’s network was based on GSM technology
• Chinese govtrefrained from issuing 3G licenses until it felt that
an indigenously developed TD-SCDMA technology was
tested to be commercially viable (China Mobile was test
marketing this in 8 cities)
 Project framework
 Universal service fund
– 37,741 villages to be covered
– Charged each fixed line number owned by the
company $.03
– Each company to self finance the project
– $4.22 billion total investment till now
 China Mobile and USF
– China mobile got 52.8% share of the task
– Spent about RMB 7 billion in first yr. itself
– Constructed 17,769 base stations
– Provided coverage in 39,784 admin villages

 China Mobile

• Emerged as separate entity in 1998

– Created from China telecom
• Later, merged with China Telecom (Hong
Kong) Limited
• Renamed to China Mobile (Hong Kong)
Limited in 2000 and to China Mobile
Limited in 2006
 Over the years
• Capital expenditure:
• Early focus : acquiring – Construction of GSM
network
provincial mobile networks
from the parent company – Transmission facilities
– Support systems
• Funding:
– New technologies
– $6.865 billion : equity
offerings • Built up its network to 340,000
– $690 million : convertible base stations
notes
– $1.5 billion : syndicated
loans
• Compound annual growth:
36.9%
– Mainly due to increased
mobile phone use
Measures of success
• Subscriber base

TABLE : B
• Total voice usage
• Average minutes per user per month
• Average revenue per user per month
• Decline of ARPU due to:
– Discounting prices
– Higher number of rural consumers
 Segmentation
• Since subscriber Three primary segments


acquisition costs 
were high, revenue
growth was mainly 1. Go tone
driven by – High end customers
encouraging more 2. M zone


use from existing – Young customers

user  3. Shenzhouxing ( Easy
• To ensure this Own)
company focused – Cost conscious
on creating specific customers
value added and •
 Promotions

• Chinese preferred pre paid service

• Packaged plans gained popularity after China’s telecom
regulators mandated “caller pays” tariff rules in 2007
• VAS : SMS, ring tones, music downloads and mobile
news
• 2006: China mobile also acquired a stake in Phoenix
Television
• Customized services for rural areas
 Entering international markets

• Acquired Pakistan’s fifth largest mobile

operator, Paktel
– Acquisition expenditure : $400 million
– Network expansion : $ 1.2 billion
– Current ARPU : $ 3/month
– Market situation in Pakistan similar to
China’s initial phase
 China Mobile’s Competitors
• China Unicom


– Established in 1994
– Long distance, Data & Internet services, Mobile + Fixed
– 2007: USD 13 billion generated by its GSM & CDMA
– China opened telecom market: Unicom tasked with rolling out
Qualcomm’s CDMA standard
– Business was divided and hence suffered
– Loss of subscriber rate reached 2.04%
– Advantage: earned revenues from interconnection fees
– China mobile had to lease lines and pay these fees for calls its
customers made
–
 China Mobile’s Competitors

• China Telecom
– Launched in 2009
– China Telecom + Unicorn’s CDMA network
– Focused on building up CDMA services


 However, China Mobile’s rural strategy put it

in a good position to continue its success
 Connecting China’s Remote
Frontier
• Staked future growth on remote areas e.g.
Yunnan province (one of the poorest)
• Difficult terrains and very low GDP per capita
• No electricity or paved roads
• China Mobile made significant investments
towards developing alternate power resources
• Most remote areas satellites were used to
connect base stations to network
 Unique Product Offerings
• Accident Insurance
– Partnered with the largest insurance companies
– Special deals at low costs. Less than the cost of
ordinary customer acquisition promotions
– Enroll customer to China Mobile Yunnan for at
least a year and accident insurance was gifted
– Included disability & medical care depending on
type of mobile service subscriber
– Customer acquisition, customer brands, reduce
churn rate, and develop customer loyalty
– Significant attraction for potential customers. By
end of 2008, 1.85 million subscribers

 Unique Product Offerings
• Cable television
– Cable available in many rural areas but
insufficient locations & subscribers to pay for
the service
– Rural residents had to travel great distances to
pay their bills
– Created program offered to pay new subscriber’s
television bills for them, providing free digital
service
– The customer’s need is our opportunity’
 Going Beyond Cun Cun Tong
• High cost involved in
infrastructure ($3
billion)
• Interest in servicing rural
customer in whole
china
Measurement of
Contribution
• Affordable phone service
• Access to information Relevant
to village life
• Connection to sales and
service channel
• Innovative new products
• Broader access to news and
information

Revenue and profit was also monitored primarily

 Rural Information Services

• Huge network • RIN promoted sharing

establishment and exchange of info.
• Launch of Rural • Weather and agriculture
Information network information
(RIN) • Information was pushed
• Available in 13 province and also on pull
initially • Extensive research and
• 2008, whole China was survey was undertaken
covered. before rolling out the
service
•
•
 Rural Information Services….
More Accessibility

Accessibility


• Regular mobile phones • Terminals were connected

to loud speakers
• Rural information
• Village leader can even
terminals
broadcast message from
• Unified information centre his wireless handset
or “Hotline” was • Instantaneous
available @ 12582 announcements on
• Information via instant routine matter and
messaging emergencies
• Alerts and bulletins through
text messages
 Measure of success


Success of RIN
• Wide distribution of • Operating cost was very
network terminals low
• 4,00,000 terminal already • Consumer responded
distributed very favourably to
useful content
• Differential price
packages for rural • Customer demand has
people exceeded projections
• •
 Specifications
Terminals design

• Multiple design
• Different level of
functionality
• Vice SMS
• Access to hotline services
• Access to website
Contents of Network

• Agriculture policies and
regulation
• Agriculture news
• Agriculture technology
• Price and product information
• Pest management and
prevention
• Market development
• Agriculture weather forecast
• Labor information and job
search
• Emergency alerts
• Lifestyle and health
 Mobile technology brought
business
Ø Sugarcane: Timed production, Orderly
process


Ø Cucumber : Higher price from middleman



Ø Tea and tobacco : removal of middleman



Ø Tea: Annual income rose substantially

Ø
 Building loyalty through customer
relationships
• Hired village leaders as agents
 Distribution network
• Promotes rural information
• Tiered distribution channel services
• Full time employee : sales • Main responsibilities
representatives and – Selling
managers – Recharge
• Villages: outsourced agents – Paying acct invoice
• Affiliated rural stores – Promotional activities
– Collecting feedbacks
• Small shops in villages
– Market information
• 320398 sales centre
–
• Third party partners: 92% of
Involvement of local population translated to long term re
total sales
Is rural
communication
strategy right for
long term ?
THANK YOU