said China's different? Its telecoms market, for example, is starting
to bear some of the hallmarks of a mature western market.
In its latest financial results, China Telecom,
the country's largest fixed-line operator, reported a drop in profit of
2.7% and complained of slow growth in its core business. Strong demand
for broadband internet helped save the day and ensured overall revenue
rose 3.4% to 175bn yuan.
Its plight mirrors that of many incumbent fixed-line operators in
the west who are struggling to find new high-growth opportunities to
counter the inevitable decline in traditional voice revenues.
The latter is driven partly by people increasingly using mobile
networks instead of fixed-line telephones to make calls and, sure
enough, ,China Telecom singled out this fixed-mobile substitution as an
China Telecom added nearly 13m connections in 2006 and its
fixed-line subscriber base reached 223m. Broadband customers rose 35%
to 28m. Non-voice services increased to 29% of total revenue, up 5
percentage points from 2005.
More on China Telecom's results in this Xinhua story.
In stark contrast to China Telecom's lacklustre results, China Mobile, the country's biggest mobile carrier, recently announced that EBITDA profit rose 20% in 2006 and turnover rose 22% to 295bn yuan.
China Mobile increased its subscriber base to more than 300m users in 2006, a rise of more than 22%.
Given a choice between China's fixed and mobile telecoms markets,
there really is no contest for western businesses. The number of
broadband fixed-line customers that China Telecom has is less than one
tenth of China Mobile's subscriber base.
True, the lack of high-speed 3G networks currently limits the
opportunities for delivering value-added services on cellphones. But
sooner or later, China will join the 3G party and I expect that Chinese
mobile phone users will take much more readily to accessing broadband
services on their phone than people in the west, not least because of
the relatively low penetration of fixed-line broadband in their homes.