BIZCHINA> Weekly Roundup
Mobile telecommunication upward
(China Daily)
Updated: 2008-04-28 11:31

Deregulation and restructuring

Noticeably, the bureaucracy in China's mobile telecommunication industry in the mid 1990s also gave rise to the popularity of pagers. Although the fever quickly faded in the early 2000s as mobile phone calls became cheaper, the beeper subscriber base still reached 46.74 million by the end of 1999.

With the deepening of the reforms and opening-up in the country, the government started pondering introducing competition into the telecom market. As part of that effort, China Unicom, a new telephone company, was established in 1994 to operate mobile phone services.

With the help of foreign investors, China Unicom built GSM (Global System for Mobile Communications) networks in Beijing, Tianjin, Shanghai and Guangzhou in the first year of its establishment and then expanded into other cities to build a nationwide network. In 2002, China Unicom also launched another nationwide mobile network based on CDMA technology.

The establishment of China Unicom was hailed as a landmark in the reform of China's telecom industry.

Chen Ruming, a veteran in China's telecom industry, says the establishment of China Unicom significantly promoted the mass application of mobile telecommunications in China.

Also in 1994, China Ministry of Posts and Telecommunications decided to make its telecom business arm an independent company, which later become China Telecom. The company later grew into a corporate behemoth and was ordered to break up into two companies in 2000 and form China Mobile to offer GSM mobile phone services and another one which retained the name of China Telecom and operated solely fixed-line services.

More significantly, the spin-off of telephone companies from the government boosted the domestic telecom market.

From 1987 to 1997, the number of China's mobile phone users increased from zero to more than 3 million. The number quickly surged to 145 million in 2001 and surpassed the 500 million mark last year.

Rise of domestic manufacturers

The rapid uptake of China's mobile communications market is due to not only more carriers, but also competition among handset manufacturers, which has been fiercer than elsewhere in the world.

In China's analog network time, Motorola was the undisputed king, where the company's expensive black brick-like 8900 and 9900 models were a symbol of affluence for most of the Chinese businesspeople at that time.

Motorola maintained the monopoly until 1994 when Wu Jichuan, then minister of Communications, Posts and Telegraphs, was invited to make a test call in an industry forum based on GSM technology with former Nokia CEO Jorma Ollila, who sensed opportunity from China's upcoming deployment of the second generation network and decided to increase Finnish company's investment in the country.

In the following years, foreign companies including Nokia, Ericson and pioneer Motorola have all increased their presence in China where they started building new factories and establishing joint ventures with local partners and significant reduced the handset prices.

However, the most significant uptake did not come until the rise of domestic mobile phone manufacturers.

Foreign companies' huge investments as well as their monopoly on related technologies, ensured they dominated the market. By the end of 1999, foreign companies accounted for over 90 percent of China's mobile phone market.

As part of its effort to protect the domestic manufacturers, the Chinese government introduced a new system for mobile phone manufacturing in December 1998.

It required a license from regulators for manufacturing and selling handsets in the country and set a higher standard for foreign companies because it required foreign manufacturers to export at least 60 percent of their handsets produced in China.

As a result of the regulation, Chinese handset manufacturers such as TCL, Panda and Ningbo Bird have seen a rapid growth, which significantly intensified the market competition.


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