China Mobile1

8/6/2019 China Mobile1

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CHINA Mobile


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China Mobile was the world's leading mobile communications service provider withover 400 million customers.

In some cities, its penetration rate was over 100% & Chairman Wang Jianzhou wasexploring ways to expand its customer base (rural penetration rate was still just15%)

Nearly saturated in the cities, China Mobile needed to broaden its base ofsubscribers

Wang believed that further investment in China's rural villages was a key strategythat would help fuel growth for the future.

The company's participation in the government-mandated Connect Every Villageproject helped it in subsequently building out the value added RuralInformation network through its initiatives (to make its mobile phone networkmore valuable to the lifestyles of China's rural population)

Around 2,14,000 villages were still not connected and the govt was agressivelyplanning network rollouts at the rate of 10% per year


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Risks inherent in China Mobiles 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


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Telecom.Industry

Govts attempt topromote

enterprise reformthrough structural

changes


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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 startedloosing out

Jan-July 2008: 10.6 million fixed line subscribersdropped their service whereas wirelesssubscriptions grew by 61 million

Asymmetric growth as China Mobile started enjoyingadvantages due to growth in mobile subscriptions


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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 Unicoms wireless

service(CDMA technology) & the non satelliteassets of China Satcom

China Mobile which already had a strong position in the wirelesssegment waited to respond to China Unicom & China Telecom


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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 ofroom for further development


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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 thetype of network) China Mobiles network was based on GSM technology Chinese govtrefrained from issuing 3G licenses until it felt that

an indigenously developed TD-SCDMA technology wastested to be commercially viable (China Mobile was testmarketing this in 8 cities)


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Project frameworkUniversal 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


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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 MobileLimited in 2006


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Over the years

Early focus : acquiringprovincial mobile networksfrom the parent company

Funding: $6.865 billion : equity

offerings

$690 million : convertiblenotes

$1.5 billion : syndicatedloans

Compound annual growth:36.9%

Mainly due to increasedmobile phone use

Capital expenditure: Construction of GSM

network

Transmission facilities

Support systems

New technologies

Built up its network to 340,000base stations


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Measures of success Subscriber base

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

TABLE

:B


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Since subscriber

acquisition costswere high, revenuegrowth was mainlydriven byencouraging more

use from existinguser

To ensure thiscompany focusedon creating specificvalue added and

Segmentation

Three primary segments

1. Go tone High end customers

2. M zone

Young customers 3. Shenzhouxing ( Easy

Own) Cost conscious

customers


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Promotions

Chinese preferred pre paid service

Packaged plans gained popularity after Chinas telecomregulators 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


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Entering international markets

Acquired Pakistans fifth largest mobileoperator, Paktel Acquisition expenditure : $400 million

Network expansion : $ 1.2 billion Current ARPU : $ 3/month

Market situation in Pakistan similar toChinas initial phase


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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

Qualcomms 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 Mobiles Competitors


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China Mobiles Competitors

China Telecom Launched in 2009

China Telecom + Unicorns CDMA network

Focused on building up CDMA services

However, China Mobiles rural strategy put itin a good position to continue its success


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Connecting Chinas RemoteFrontier

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 investmentstowards developing alternate power resources

Most remote areas satellites were used toconnect base stations to network


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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 atleast a year and accident insurance was gifted

Included disability & medical care depending ontype of mobile service subscriber

Customer acquisition, customer brands, reducechurn rate, and develop customer loyalty

Significant attraction for potential customers. By

end of 2008, 1.85 million subscribers


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Cable television Cable available in many rural areas but

insufficient locations & subscribers to pay forthe service

Rural residents had to travel great distances to

pay their bills Created program offered to pay new subscribers

television bills for them, providing free digitalservice

The customers need is our opportunity

Unique Product Offerings


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Going Beyond Cun Cun TongMeasurement of

Contribution High cost involved ininfrastructure ($3billion)

Interest in servicing ruralcustomer in whole

china

Affordable phone service

Access to information Relevantto village life

Connection to sales andservice channel

Innovative new products

Broader access to news andinformation

Revenue and profit was also monitored primarily


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Rural Information Services

Huge networkestablishment

Launch of RuralInformation network(RIN)

Available in 13 provinceinitially 2008, whole China was

covered.

RIN promoted sharingand exchange of info.

Weather and agricultureinformation

Information was pushed

and also on pull Extensive research and

survey was undertakenbefore rolling out theservice


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Rural Information Services.

Accessibility

Regular mobile phones Rural information

terminals

Unified information centre

or Hotline wasavailable @ 12582

Information via instantmessaging

More Accessibility

Terminals were connectedto loud speakers

Village leader can evenbroadcast message fromhis wireless handset

Instantaneousannouncements onroutine matter andemergencies

Alerts and bulletins throughtext messages


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Success of RIN

Measure of success

Wide distribution ofnetwork terminals

4,00,000 terminal alreadydistributed

Differential pricepackages for ruralpeople

Operating cost was verylow

Consumer respondedvery favourably touseful content

Customer demand hasexceeded projections


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Specifications

Terminals design

Multiple design

Different level offunctionality

Vice SMS

Access to hotline services

Access to website

Contents of Network

Agriculture policies andregulation

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


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Mobile technology brought

business

Sugarcane: Timed production, Orderlyprocess

Cucumber : Higher price from middleman

Tea and tobacco : removal of middleman

Tea: Annual income rose substantially


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Building loyalty through customerrelationships

Distribution network

Tiered distribution channel Full time employee : sales

representatives andmanagers

Villages: outsourced agents

Affiliated rural stores

Small shops in villages

320398 sales centre

Third party partners: 92% oftotal sales

Hired village leaders as agents

Promotes rural informationservices

Main responsibilities Selling

Recharge

Paying acct invoice

Promotional activities

Collecting feedbacks

Market information

Involvement of local population translated to long term r


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Is ruralcommunicationstrategy right forlong term ?


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THANK YOU

Documents

China Mobile1