China's wireless growth attracts big players

China's wireless market is so big and fast-growing that it remains a target for global telecommunications companies despite the general gloom surrounding the industry in the wake of the exorbitant 3G (third-generation) spectrum auctions last year, according to analyst Strategis Group.

Currently, only 6.7 percent of China's citizens subscribe to mobile phone services. Subscriber numbers will grow at 41 percent this year, with a total 120 million subscribers expected by the end of this year, and 334 million by 2007, a penetration rate of 23 percent, according to predictions in a report released Tuesday by Strategis.

Most of the growth in the Chinese subscriber base will be from new users in large cities and the more affluent coastal provinces. A general decline in cost, expansion of the coverage area, and the introduction of new services are also driving the rapid growth, Strategis said.

In the first quarter of 2001, subscriber numbers grew 20 percent in China, compared to 3 percent growth in the U.S. and Italy, 2 percent in Germany and 1 percent in Japan, according to Strategis.

According to the report, global wireless carriers will continue to invest in high-growth wireless markets despite the impact of poor economic conditions on the telecommunication sector.

In particular, China is a strategic market for the U.K.'s Vodafone Group PLC, which plans to take up to a 25 percent stake in China Mobile (Hong Kong) Ltd., the publicly-listed arm of China's biggest mobile telecommunications operator, Strategis said.

In 2000, China Mobile reported revenue up 78 percent and net profit up 276 percent, and had around 52 million subscribers by the end of March. While Vodafone added 616,000 subscribers in the U.K. during the first quarter of 2001, China Mobile added 11.7 million subscribers, Strategis said.

Vodafone currently has a 2.2 percent stake in China Mobile, and the two companies signed a strategic agreement in February which covered several areas of cooperation and allowed for exchange and sharing of high-level management between the two companies.

The agreement is in line with Vodafone's rebranding strategy for the Asian market overall, which is forecast to show a compound annual growth rate of 14 percent between 2000 and 2007, according to Strategis.

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