Chinese Mobile Operators Report 443.6-mil. Subscribers at End-2006

China Mobile, the Hong Kong-listed unit of China's largest mobile carrier by subscribers, said today that it added a net of 4.83 million new customers in December last year, up from the net addition of 4.67 million subscribers in November. The monthly addition was the largest China Mobile has reported so far. The carrier said 4.5 million of its new customers in December were pre-paid subscribers, and 322,000 were contract customers. The December additions raised China Mobile's total number of subscribers to 301.23 million, including 235.96 million pre-paid customers and 65.27 million contract customers.

Meanwhile, China Mobile's smaller rival—China Unicom—said it added 1.26 million subscribers in December, including an addition of 0.90 million GSM customers and an increase of 0.36 million CDMA subscribers. The December addition took its total number of mobile customers to 142.37 million, consisting of 105.87 million GSM and 36.49 million CDMA users.

Outlook and Implications

• Low-Income Customers Drive Further Subscriber Growth: China Mobile significantly outperformed China Unicom in terms of subscriber addition in 2006. China Mobile added a total of 54.58 million mobile subscribers during the course of 2006, compared with the addition of 42.36 million in the previous year. In comparison, China Unicom added a total of 14.57 million mobile subscribers in 2006, lower than the figure of 15.71 million in 2005. China Mobile's success in maintaining robust subscriber growth is mainly attributable to its attempt to expand into previously under-served central and western regions and the country's massive rural markets. As the more-developed market near China's east coast becomes increasingly penetrated, China Mobile has been expanding its mobile networks and sales channels into smaller cities and rural areas further inland, and has developed product and service packages targeting low-income customers. According to a survey conducted by China Mobile in 2006, China's rural mobile penetration was estimated to be about 11.5%, while the country's overall mobile penetration level stood at around 35%. The momentum of growth in the central and western regions and in the rural market is expected to remain strong this year, with China Unicom having also started pursuing growth opportunities in these areas.
• 3G and Data Offerings to Help Improve ARPU/Revenue: Although there is still ample room for further subscriber growth in China's mobile market, it is likely that the bulk of such growth will be driven by low-income customers. This will inevitably have a negative impact on the operators' average revenue per user (ARPU) level. To improve their ARPU/revenue levels and satisfy increasing customer demand for data services, both China Mobile and China Unicom are moving towards customising their mobile content offerings and targeting specific industry segments. Both operators have reported significant increases in their data revenues. In the first half of 2006, China Mobile generated 17.8% of its total operating revenues from data services. Of these, 38% came from non-SMS services such as ringtones and WAP (see table below). The expected 3G launch will help the operators refine their existing strategies of mobile data offerings and give a further boost to the usage of these services.