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The mainland's big mobile player plans to add yet more market share
China Mobile is the dominant player in the world's largest mobile market—and it has clear global ambitions that go beyond the mainland. Though the track record of Chinese companies hasn't been stellar on that front, China Mobile Chairman and Chief Executive Officer Wang Jianzhou is out to change that. "Our target is to become a world-class company," Wang said in an exclusive interview with BusinessWeek editors on the eve of the magazine's CEO Forum executive conference in Beijing, which debuts Nov. 1.
Already the Hong Kong-listed China Mobile (CHL) has close to 300 million mainland mobile phone subscribers—a sum that is roughly equivalent to the entire U.S. population, said the 57-year-old Wang, who speaks fluent English. That gives it a market share of close to 70% of China's mobile subscribers.
Last year his company occupied 39.9% of the total telecom market by revenues (its closest competitor was fixed-line operator China Telecom with 28.4% of a total market of around $72 billion). Its closest mobile rival China Unicom had only a paltry 13.4% share, according to Beijing-based telecom and technology consultancy BDA China. Among China's top four telecom operators, only China Mobile saw its revenue share grow last year.
Going to the Country
And in October, China Mobile announced that in the first three quarters its operating revenue grew 20.8% to $26.59 billion, while profit by one measure was up 25.1% to $5.77 billion. In the interview at company headquarters in Beijing's new Financial Street district, Wang also noted that China Mobile is now the 11th largest telecom operator in the world by revenues, is number five in profits, and at $150 billion, has the world's largest market capitalization for a telecom company.
While the major urban markets for mobile phone service are nearing maturation, there is still plenty of growth to be bagged in less developed regions, he argues. "In Beijing and Shanghai every adult has a mobile phone now, so the penetration rate is 97% to 100%. They are like any developed city in the world. But in rural areas, the penetration rate [of mobile phone use] is only 12%. So that is a very large potential market for us. Ordinary farmers can now start using cell phones," says Wang, noting that nationally the penetration rate is still a low 32%. With more than 50% of new subscribers in the first half of this year coming from rural China, it's clear that China Mobile is moving aggressively to tap country dwellers.
Uncertainty reigns as to when Beijing regulators will start handing out licenses for third-generation mobile services or which operators will get them for China's indigenous TD-SCDMA standard. China Telecom is likely to get permission to enter the mobile phone business creating, overnight, a third major mobile player in China.
That's why China Mobile is moving fast to lock up more market share. "Their strategy now is a land grab. They are being aggressive on pricing and locking in as many subscribers as they can before new competition enters the market with 3G," says Ted Dean, managing director at BDA China. "They are actually gaining market share at Unicom's expense."
One challenge for China Mobile and its rivals will be the expected fall in average revenue per user (ARPU), a commonly used measure with telecoms, as the company signs up new, more frugal, rural cell phone users. But China Mobile is hoping that rapid growth in its value added services and wireless data business will help counteract that.
Swiss Army Knife
And with a whopping 255 billion short messages sent by China Mobile subscribers so far this year, plus surging growth in music downloads for ring-back tones, value-added services already make up some 23% of total revenues. "We want to make the mobile phone a Swiss Army knife that can do anything for you," says Wang, who also expects significant growth in mobile Internet in China, where the total of Internet users has reached some 120 million.
With its big cash chest, China Mobile is also looking for acquisitions. In June its parent company China Mobile Communications (which owns about 75% of the list company) paid $166 million for a 19.9% stake in Rupert Murdoch's Phoenix Satellite Television Holdings, which has a 24-hour news programs popular with many mainland viewers. "Phoenix can give us news 30 minutes earlier than the other telecom providers in China and we can get a discount charge because we now are the second-largest shareholder."
And early this year, China Mobile acquired Hong Kong People's Telephone, with its 1.1 million subscribers. "This is a trial for our international expansion strategy," says Wang. "We will focus on emerging markets. We are not interested in the U.S. and Europe. We are interested in Asia, Latin American, and African markets," says Wang. "We will strike a balance between price and risk. Telecom valuations now are very high, so risk is high," says Wang.
Cautious words, maybe. But don't expect China Mobile to cut too prudent a figure, as it flourishes in the China mobile market and begins to eye more overseas targets as well.