china mobile1
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CHINA Mobile
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China Mobile was the world's leading mobile communications service provider withover 400 million customers.
In some cities, its penetration rate was over 100% & Chairman Wang Jianzhou wasexploring ways to expand its customer base (rural penetration rate was still just15%)
Nearly saturated in the cities, China Mobile needed to broaden its base ofsubscribers
Wang believed that further investment in China's rural villages was a key strategythat would help fuel growth for the future.
The company's participation in the government-mandated Connect Every Villageproject helped it in subsequently building out the value added RuralInformation network through its initiatives (to make its mobile phone networkmore valuable to the lifestyles of China's rural population)
Around 2,14,000 villages were still not connected and the govt was agressivelyplanning network rollouts at the rate of 10% per year
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Risks inherent in China Mobiles rural strategy: Increasing costs as coverage was extended into
remote areas Difficulty in developing rural infrastructure Customers having little cash meant that profit
margins remained thin The monopoly no longer remained and there was
fierce competition Possibility of overlooking significant opportunities
in overseas markets
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Telecom.Industry
Govts attempt topromote
enterprise reformthrough structural
changes
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Telecommunications Industry All six operators were running profitable operations
in the next few years Mobile phones began to substitute residential
phones, hence fixed line carriers slowly startedloosing out
Jan-July 2008: 10.6 million fixed line subscribersdropped their service whereas wirelesssubscriptions grew by 61 million
Asymmetric growth as China Mobile started enjoyingadvantages due to growth in mobile subscriptions
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2008 Telecommunications Reform In 2008 a series of mergers were announced to rebalance the
industry (anticipated for over 5 years) The six companies were streamlined into three full service
operators China Mobile + China Tietong China Unicom + China Netcom China Telecom acquired China Unicoms wireless
service(CDMA technology) & the non satelliteassets of China Satcom
China Mobile which already had a strong position in the wirelesssegment waited to respond to China Unicom & China Telecom
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Chinese Wireless Industry
Number of phones per capita(Penetration rate) in cities like Beijing &
Shanghai approached 100%, while in Guangzhou it was well over 100%However, overall market penetration stood at 41.6%, indicating plenty ofroom for further development
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Technology
Cellular network Standards:
1G- Analog signals that linked to radio channels 2G- Digital signals that allowed both voice & data
transmission 2.5G & 3G- More efficient and rapid data & video transfer
Adoption: China mostly used 2.5G (CDMA & GSM) China Unicom owned networks in both standards (first
operator to offer handsets which could switch between thetype of network) China Mobiles network was based on GSM technology Chinese govtrefrained from issuing 3G licenses until it felt that
an indigenously developed TD-SCDMA technology wastested to be commercially viable (China Mobile was testmarketing this in 8 cities)
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Project frameworkUniversal service fund
37,741 villages to be covered Charged each fixed line number owned by the
company $.03 Each company to self finance the project $4.22 billion total investment till now
China Mobile and USF China mobile got 52.8% share of the task Spent about RMB 7 billion in first yr. itself Constructed 17,769 base stations Provided coverage in 39,784 admin villages
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China Mobile
Emerged as separate entity in 1998 Created from China telecom
Later, merged with China Telecom (Hong
Kong) Limited Renamed to China Mobile (Hong Kong)
Limited in 2000 and to China MobileLimited in 2006
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Over the years
Early focus : acquiringprovincial mobile networksfrom the parent company
Funding: $6.865 billion : equity
offerings
$690 million : convertiblenotes
$1.5 billion : syndicatedloans
Compound annual growth:36.9%
Mainly due to increasedmobile phone use
Capital expenditure: Construction of GSM
network
Transmission facilities
Support systems
New technologies
Built up its network to 340,000base stations
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Measures of success Subscriber base
Total voice usage
Average minutes per user per month
Average revenue per user per month Decline of ARPU due to:
Discounting prices
Higher number of rural consumers
TABLE
:B
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Since subscriber
acquisition costswere high, revenuegrowth was mainlydriven byencouraging more
use from existinguser
To ensure thiscompany focusedon creating specificvalue added and
Segmentation
Three primary segments
1. Go tone High end customers
2. M zone
Young customers 3. Shenzhouxing ( Easy
Own) Cost conscious
customers
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Promotions
Chinese preferred pre paid service
Packaged plans gained popularity after Chinas telecomregulators mandated caller pays tariff rules in 2007
VAS : SMS, ring tones, music downloads and mobile
news 2006: China mobile also acquired a stake in Phoenix
Television
Customized services for rural areas
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Entering international markets
Acquired Pakistans fifth largest mobileoperator, Paktel Acquisition expenditure : $400 million
Network expansion : $ 1.2 billion Current ARPU : $ 3/month
Market situation in Pakistan similar toChinas initial phase
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China Unicom
Established in 1994 Long distance, Data & Internet services, Mobile + Fixed 2007: USD 13 billion generated by its GSM & CDMA China opened telecom market: Unicom tasked with rolling out
Qualcomms CDMA standard Business was divided and hence suffered Loss of subscriber rate reached 2.04% Advantage: earned revenues from interconnection fees China mobile had to lease lines and pay these fees for calls its
customers made
China Mobiles Competitors
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China Mobiles Competitors
China Telecom Launched in 2009
China Telecom + Unicorns CDMA network
Focused on building up CDMA services
However, China Mobiles rural strategy put itin a good position to continue its success
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Connecting Chinas RemoteFrontier
Staked future growth on remote areas e.g.Yunnan province (one of the poorest)
Difficult terrains and very low GDP per capita
No electricity or paved roads
China Mobile made significant investmentstowards developing alternate power resources
Most remote areas satellites were used toconnect base stations to network
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Unique Product Offerings
Accident Insurance
Partnered with the largest insurance companies Special deals at low costs. Less than the cost of
ordinary customer acquisition promotions
Enroll customer to China Mobile Yunnan for atleast a year and accident insurance was gifted
Included disability & medical care depending ontype of mobile service subscriber
Customer acquisition, customer brands, reducechurn rate, and develop customer loyalty
Significant attraction for potential customers. By
end of 2008, 1.85 million subscribers
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Cable television Cable available in many rural areas but
insufficient locations & subscribers to pay forthe service
Rural residents had to travel great distances to
pay their bills Created program offered to pay new subscribers
television bills for them, providing free digitalservice
The customers need is our opportunity
Unique Product Offerings
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Going Beyond Cun Cun TongMeasurement of
Contribution High cost involved ininfrastructure ($3billion)
Interest in servicing ruralcustomer in whole
china
Affordable phone service
Access to information Relevantto village life
Connection to sales andservice channel
Innovative new products
Broader access to news andinformation
Revenue and profit was also monitored primarily
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Rural Information Services
Huge networkestablishment
Launch of RuralInformation network(RIN)
Available in 13 provinceinitially 2008, whole China was
covered.
RIN promoted sharingand exchange of info.
Weather and agricultureinformation
Information was pushed
and also on pull Extensive research and
survey was undertakenbefore rolling out theservice
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Rural Information Services.
Accessibility
Regular mobile phones Rural information
terminals
Unified information centre
or Hotline wasavailable @ 12582
Information via instantmessaging
More Accessibility
Terminals were connectedto loud speakers
Village leader can evenbroadcast message fromhis wireless handset
Instantaneousannouncements onroutine matter andemergencies
Alerts and bulletins throughtext messages
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Success of RIN
Measure of success
Wide distribution ofnetwork terminals
4,00,000 terminal alreadydistributed
Differential pricepackages for ruralpeople
Operating cost was verylow
Consumer respondedvery favourably touseful content
Customer demand hasexceeded projections
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Specifications
Terminals design
Multiple design
Different level offunctionality
Vice SMS
Access to hotline services
Access to website
Contents of Network
Agriculture policies andregulation
Agriculture news Agriculture technology Price and product information Pest management and
prevention Market development Agriculture weather forecast Labor information and job
search Emergency alerts Lifestyle and health
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Mobile technology brought
business
Sugarcane: Timed production, Orderlyprocess
Cucumber : Higher price from middleman
Tea and tobacco : removal of middleman
Tea: Annual income rose substantially
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Building loyalty through customerrelationships
Distribution network
Tiered distribution channel Full time employee : sales
representatives andmanagers
Villages: outsourced agents
Affiliated rural stores
Small shops in villages
320398 sales centre
Third party partners: 92% oftotal sales
Hired village leaders as agents
Promotes rural informationservices
Main responsibilities Selling
Recharge
Paying acct invoice
Promotional activities
Collecting feedbacks
Market information
Involvement of local population translated to long term r
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Is ruralcommunicationstrategy right forlong term ?
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THANK YOU