China is approaching 500 million mobile phone subscribers and fast, according to the new eMarketer report, China Mobile.
"The country's 1.3 billion people are feeding the demand, and its robust electronics manufacturing sector is supplying handsets on a mammoth scale," says James Belcher, eMarketer Senior Analyst and author of the report. "By the end of 2007, China will have the ability to manufacture 500 million handsets per year."
Mobile users in China get their service mainly from a duopoly, China Mobile and China Unicom, which are the two largest mobile operators on the planet, by far.
The two mammoth firms are adding new subscribers at a rate of roughly five million new additions each month.
"Revenue growth, however, is threatening to stall, as the buildout to rural areas will be costlier than it was for the denser urban areas," says Mr. Belcher. "Moreover, the saturated urban market is facing downward price pressure from limited-range wireless offerings, and from competition for potential new subscribers. Nevertheless, the duopoly is eager to build out 3G networks, and begin selling the multimedia services they will make possible, even at the cost of the new competitors and more intense customer service requirements the new networks will bring."
Currently, China Mobile and China Unicom are competing for city dwellers who do not yet have mobiles, with discounts, cheap phones and, ultimately, lower ARPU for themselves.
"Carriers are trying to get users to do things with their phones besides talk, with some success," says Mr. Belcher. "Ringback tone sales may be the closest thing to a legitimate music download market the country has."
Likewise, mobile users in China are second only to those in Japan when it comes to downloading video games, making mobile gaming in China another growth market.
"Every market opportunity in China seems vast and mobile telecommunications is no exception. Significant real opportunities exist for foreigners who want in," says Mr. Belcher. "The technologies on which China's next-generation mobile networks will be built are largely of foreign design, and transnational handset makers already have a firm foothold in the market."
The keys will lie in understanding how to do business in the country, acknowledging differences among both business and consumer buyers compared to other countries, and, in the case of 3G, timing.
To see where this massive marketed is heading, read the new eMarketer report, China Mobile.