Current developments of the telecommunication market in the People's Republic of China - domestic companies vs. foreign companies

INdeX

A. Introduction
The authors and purpose of this essay

B. The PRC´s telecommunication market
1. The growth of mobile phone users
2. The telecom industry as a part of the GDP

C. The companies in the chinese telecommunication market
1. Foreign companies in the chinese market
(a) Siemens
(b) Nokia
(c) Motorola
2. Domestic chinese companies in the market
(a) Ningbo Bird
(b) TCL
(c) Haier

D. Market development, strategies and the future perspective
1. Current development in the PRC´s mobile-phone market
2. The market strategies
3. The future perspective

E. Appendix
1. Literature
2. Pictures

A. Introduction

The authors and purpose of this essay

In China a tough competition in the mobile-phone business has evolved between western-like global operating companies and domestic chinese telecommunication companies. The battle is about market shares in the rapidly growing market of mobile phones in the PRC.

Mobile phones, or in chinese “Shouji”^[1], become increasingly popular, especially in the so-called boom-areas where mobile phones have become a status symbol like in other western countries so that people own 2 or 3 or even more mobiles whereas in rural areas the development of mobile communication networks still goes often against zero.

The purpose of this essay is to show up some facts about the PRC´s telecommunication market, to introduce the reader to the most important foreign and domestic companies doing business in this market, to show up the current situation of both types of companies in China, and to analyse some reasons for the recent market development.

Claas Bartels, Holger Wenk and Michael Mahlich are alltogether students at the Business Faculty of the “University of Applied Sciences and Arts” in Hildesheim, Germany, studying the field Business and Administration with specialisation in Controlling, Finance, Accounting, Taxation, IT and International Business.

B. The PRC´s telecommunication market

1. The growth of mobile phone users

The number of mobile phone users increased steadily during the last decade, but there are differences in service availability. The East coast, as well as the biggest cities has a good mobile phone infrastructure. On the other hand Chinas inland and the Western part are not so well established. The mobile network covers all large urban areas and more than 98% of smaller urban centres in the country. International roaming services exist with more than 120 countries or regions. In 1995 nearly 3.7 million people used a mobile phone. This rate increased during the next seven years to 176 million in July 2002 and one year later in August 2003 250 million were using a mobile phone. The Wall street Journal expects that the number of users will amplify to 750 million until 2007.

China has nowadays six infrastructure operators. These include China Telecom, China Netcom, China Mobile, China Unicom, China Telecom Broadcast Satellite Corp. and China Railcom.

2. The telecom industry as a part of the GDP

In 2002, China's domestic GDP growth was 8%, and the growth of telecom revenue was 13.5%. Since the telecom industry keeps growing at a rate faster than that of China's national economy, it provides strong support for the GDP growth. Compared with the global average, the share of telecommunications revenue in the GDP figure is relatively high. This is, to some extent, an indication that the telecom industry in China is making an outstanding contribution to the development of the national economy.

A good and stable economic environment and will provide sufficient room for continuous development of China's telecom industry. From demand for telecom service point of view, along with further increase of domestic demand and growth in telecom service consumption, the scale of the telecom market shall be further expanded. It is estimated that the increase of telecommunication market demand will maintain a growth rate of 10% - 15%

C. The companies in the chinese telecommunication market

1. Foreign companies in the chinese market

The foreign companies doing business in the chinese telecommunication market are introduced in this chapter. They are altogether very successful and it is interesting to analyse their business strategy in the PRC`s mobile-phone market later on. But before this can be done some key facts about the companies concerned have to be given:

(a) Siemens AG

illustration not visible in this excerpt

Figure 1: Siemens company logo

Siemens is a German company with a long tradition, since 1847 and one of the worldwide biggest companies in the high technical sector. It employees 417 000 people (September 2003) in different business fields, 44000 in the Asia-Pacific region and 21000 of them in China. Beside the Information and Telecommunication sector, it is also active in Automation and Control, Power, Transportation, Medical, Lightning and Finance and Real Estate Investments. The total turnover in the business year 2003 declined on 74,233 billion Euros in comparison with 84,016 billion Euros in 2002. Approximately 17,1 billion Euro was the share of communication networks and communication mobiles. The turnover of all business fields in China add up to 2,8 billion Euro ( 3,2 billion in 2002 – reasoned in decreasing exchange rates for “Euro-companies” in 2003). In total Siemens achieved a net profit of 2,445 billion Euros in 2003, but the share of the communication mobile was only 0,180 billion Euros, communication network even had a lost of 0,366 billion Euros (, because of the weak semiconductor sector).

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^[1] A mixture of the chinese characters for „hand“ and „device“