? X Bookmarks More »

Email This Post

Print This Post

Did China miss an opportunity when they reorganized their telecoms last week? Robert Clark of BusinessWeek thinks so. He says that the reshuffling has been so domestically focused that it has missed the chance to prepare China Mobile and China Unicom, China’s two largest mobile phone operators, to become global players.

The pieces of China’s telecom reorganization have fallen into their well-telegraphed place. But the exercise has been wholly focused on the domestic market with the aim of bringing China Mobile back to Earth. What it really misses is the chance to prep Mobile and rival China Unicom to become global carriers.

Clark points out that the most growth in the mobile phone industry is coming from the emerging markets – Africa, India and Southeast Asia. American, European and India mobile operators are already trying to situate themselves in these markets. Bharti Airtel—India’s biggest mobile service provider—recently tried to acquire Africa’s largest provider, MTN.

As Sara Corbett illustrated in a brilliant New York Times Magazine article last April, one only needs to look at sales figures to get a sense of how rapidly mobile phones are penetrating the global marketplace.

According to statistics from the market database Wireless Intelligence, it took about 20 years for the first billion mobile phones to sell worldwide. The second billion sold in four years, and the third billion sold in two. Eighty percent of the world’s population now lives within range of a cellular network, which is double the level in 2000. And figures from the International Telecommunications Union show that by the end of 2006, 68 percent of the world’s mobile subscriptions were in developing countries. As more and more countries abandon government-run telecom systems, offering cellular network licenses to the highest-bidding private investors and without the burden of navigating pre-established bureaucratic chains, new towers are going up at a furious pace. Unlike fixed-line phone networks, which are expensive to build and maintain and require customers to have both a permanent address and the ability to pay a monthly bill, or personal computers, which are not just costly but demand literacy as well, the cellphone is more egalitarian, at least to a point.

China’s domestic focus could also limit the usefulness of its homegrown 3G technology, TD-SCDMA. Without a significant presence in Southeast Asia’s huge emerging market, China’s telecoms will be hard pressed to compete with the other international 3G standards. While it may maintain market share in China, globally, TD-SCDMA may find itself in the same company as the Beta tape, marginalized to the point of irrelevance.

The power of the mobile phone in emerging economies like India, China and Southeast Asia cannot be overlooked. Corbett writes:

People in the mobile-handset business talk about adding customers not by the millions but by the billions, if only they could get the details right. How do you make a phone that can be repaired by a streetside repairman who may not have access to new parts? How do you build a phone that won’t die a quick death in a monsoon or by falling off the back of a motorbike on a dusty road? Or a phone that picks up distant signals in a rural place, holds a charge off a car battery longer or that can double as a flashlight during power cuts? Influenced by Chipchase’s study on the practice of sharing cellphones inside of families or neighborhoods, Nokia has started producing phones with multiple address books for as many as seven users per phone. To enhance the phone’s usefulness to illiterate customers, the company has designed software that cues users with icons in addition to words. The biggest question remains one of price: Nokia’s entry-level phones run about $45; Vodafone offers models that are closer to $25; and in a move that generated headlines around the world, the Indian manufacturer Spice Limited recently announced plans to sell a $20 “people’s phone.”

It is these billions of customers that China’s telecoms risk missing out on. And as Clark concludes in his BusinessWeek article, “For all the pretensions of global leadership, it seems Chinese carriers would prefer to stay home.”