Date
24 August 2017
Network speed is less important for many Chinese mobile phone users
Network speed is less important for many Chinese mobile phone users

Apple may not reap big windfall from China Mobile

The mobile broadband market has finally opened up in China. The Ministry of Industry and Information Technology has granted 4G licenses to all the three big carriers — China Mobile (00941.HK), China Unicom (00762.HK) and China Telecom (00728.HK). The market’s focus is however on China Mobile since the 4G network puts it closer to selling iPhones.

Mainland media has reported that China Mobile has prepared a marketing campaign for iPhones even before the 4G licenses were granted.

Last week, the Wall Street Journal reported that China Mobile plans to take pre-orders for iPhones from December 12 in Shanghai and that users can use the 4G service after December 18. But China Mobile has, as of now, only announced 4G plans in Shanghai without any word related to Apple or iPhone.

The company said it is still in negotiations with Apple.

Apple should be getting excited due to the 4G license of China Mobile. The Chinese firm is the world’s largest mobile operator by subscribers, with 759.3 million customers as of end-October, more than twice the population of the United States.

China Mobile has operated a 3G standard TD-SCDMA that was not compatible with most of the mobile phones from famous brands including iPhone. As a result, the company never signed a distribution agreement with Apple. But its rivals China Unicom and China Telecom have been selling iPhone for years given their internationally compatible 3G networks.

The new 4G licenses issued are for a homegrown standard called TD-LTE. The latest iPhone 5s and 5c models are compatible with TD-LTE, according to the specifications.

With tens of millions of potential iPhone buyers, there have been hopes that the new 4G network of China Mobile will boost the sales of Apple in China significantly. But will it be the case?

Among the three mobile network operators, only China Unicom and China Telecom have signed sales agreements with Apple. The two companies provide different service plans for iPhone, including a “Free iPhone Plan”.

According to China Unicom’s website, customers can get a free iPhone 5S (16GB version) if they join the 886-yuan monthly fee plan, which will provide 3,000 voice minutes and 4GB data usage per month. Subscribers need to sign a 2-year contract.

The minimum monthly fee is 66 yuan with 160 voice minutes and 220MB data, but the price of iPhone 5S is just 4,099 yuan, 22 percent less than buying it through the online store of Apple.
But even with such attractive prices, the two companies couldn’t attract many iPhone fans in China.

Unofficial data shows that China had nearly 40 million iPhone users at the end of 2012, but the majority weren’t users from China Unicom or China Telecom. China Mobile had more than 30 million subscribers or 80 percent of the total although its 3G network is not compatible with any iPhone models.

With mature 3G networks, China Unicom and China Telecom just had only 7 million and 1.7 million iPhone users.

The figures are intriguing. iPhone is not compatible with the 3G network of China Mobile, which means its iPhone users surf the internet with 2G network. They chose to use a slower speed network rather than join the other two 3G high-speed networks. The quality of the 2G network is one of the factors, while the monthly fee is also a consideration.

According to the latest figures, China Mobile’s average revenue per user (ARPU) stood at 66 yuan per month in the first three quarters of 2013, exactly the same as in the previous year. The figure is lower than China Unicom’s 3G monthly ARPU of 76.5 yuan.

Mobile users in China love to spend more on handsets but choose to spend less on monthly fee. They don’t care about the speed of the network because most of the users use mobile applications like Wechat and Weibo, which are just tools to send text or forward links and photos.

Affordable monthly fee is more important than the network speed.

So China Mobile already has the largest group of iPhone users, its customers are price (monthly fee) sensitive and most Chinese think slower mobile network speed is enough for “Wechating”. Given this situation, China Mobile could prove to be a disappointment for Apple. Benefits will be realized only if the firms manage to change the habits of the nation’s mobile users.

RC

Vivian Chung is a financial journalist with more than 10 years’ experience. She writes mostly on financial issues relating to Hong Kong and China

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