China Mobile Adds 5.12 mil. Mobile Subscribers in May, Down 12% from April

China Mobile said that it added 5.118 million mobile subscribers in May, down 12% from the 5.823 million added in April. The addition took the company's total number of mobile subscribers to 488.1 million at the end of May. Its new 3G mobile service, based on the home-grown TD-SCDMA technology, attracted 746,000 new users in the month, compared to the 514,000 users added during April. The company had a total of 2.12 million TD-SCDMA users at end-May.

Meanwhile, China Telecom reported a net addition of 2.2 million users for its CDMA mobile network, up from the 1.87 million added in April. The company's total number of CDMA mobile users reached 36.91 million at end-May. However, the company lost 1.35 million fixed-line users in the same month to a total of 200.75 million. Its broadband Internet subscriber base grew by 750,000 to a total of 48.24 million.

China Unicom only added 682,000 mobile users to its GSM network last month,—the lowest monthly addition this year—as the company scaled back the promotion and prepared for the commercial trial of its 3G service which started on 17 May. The company had a total of 139.515 million GSM subscribers at end-May. Meanwhile, the operator lost a net 289,000 fixed-line users in May to make a total of 108.707 million. The company's broadband-Internet subscriber base increased by a net of 779,000 subscribers to a total of 33.933 million.

Outlook and Implications

• Slower Monthly Subscriber Additions for China Mobile: Although China Mobile has reported declines in net mobile subscriber additions for three consecutive months, it would be too early to say that this signals the start of a long-term declining trend. The company has blamed slower economic growth for its weaker subscriber addition. With overall mobile penetration of just over 50%, there is still ample organic growth potential in the Chinese mobile market, particularly in the massive rural markets. Nevertheless, to achieve its target of adding a net 75.6 million subscribers this year, the company would need to add an average of 6.3 million users per month.
• Faster 3G User Acquisition: On the other hand, China Mobile's speed of adding TD-SCDMA users has been on the rise, since it commenced 3G business operation in January this year by leasing the TD-SCDMA networks from its state-owned parent China Mobile Communications Corporation. The company had acquired a total of 2.12 million TD-SCDMA users by end-May, including the 226,000 users transferred to the company on a one-off basis from its parent in January. However, the growth has been achieved on the basis of significant cuts on the 3G service fees aimed at attracting customers.
• Stiff Competition Ahead in 3G Segment: China Mobile's first-mover advantage in the 3G segment could soon diminish as rivals roll out their 3G services based on the more mature 3G standard. The richer options of W-CDMA and CDMA 2000 1X EV-DO handsets compared to TD-SCDMA handsets are a particular competitive disadvantage for China Mobile. The mobile giant has significantly invested in the research and development of TD-SCDMA handsets and has shifted its TD-SCDMA terminal strategy from mass purchase to highly tailored designs in order to improve the quality of TD-SCDMA handsets (see China: 18 May 2009: China Mobile to Inject US$88 mil. into TD-SCDMA Handset R&D).