Bear Stearns JUNE 20, 2007 China Telecom Services and
Equipment
Off-Road Wireless Survey VIII
Wireless Services and Handset Trends in Ten Chinese Cities
􀂄 CHINA MOBILE CUTS PREPAID ARPM. In first-half 2007, incremental GSM
average revenue per minute (ARPM) fell 15.8% sequentially, while CDMA
ARPM rose 16% (albeit from a low base in second-half 2006). GSM pricing was
driven down by prepaid price cuts by China Mobile in seven of ten markets. The
decline reflected the company’s inclusion of large quantities of free minutes in
packages offered to new subscribers purchasing low-end handsets.
􀂄 MORE LOW-END GSM SUBSIDIES, CDMA ‘C5’ PROMOTIONS. China Mobile’s
handset promotions have increased since late 2006, and Unicom is responding
with its own ‘C5’ subsidies on low- to high-end CDMA/dual-mode handsets. PAS
subsidies are very rare, except when combined with fixed line and/or broadband.
􀂄 HANDSETS: STRONG DEMAND, OPERATORS MORE AGGRESSIVE, SOME PRICING
PRESSURE. Samsung appears to have the most momentum in the China handset
market, but Nokia is also holding its own. The low-end market is getting more
competitive, as operators are increasingly involved in handset co-branding and
sales. Based on survey observations, we believe local brands ZTE and Huawei
may have increased their low-end market share.
􀂄 EXPECTING 26% HANDSET GROWTH IN 2007. We have raised our 2007 handset
sell-through estimate by 4% to 173.5 million, after raising our subscriber net
addition and CDMA handset replacement estimates.
Research Analysts
Evan Erlanson, CFA Bear Stearns Asia Ltd.
Adam B. Clark Hong Kong
Colin Morawski Regulated by the Securities and
Lin Chen Futures Commission of Hong Kong
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