The past week saw quite a few developments in the telecom sector, especially in China. China, which is the world’s largest mobile market by subscriber base, saw a 1.23 % increase in mobile subscribers February to close in on the billion subscriber mark. 3G adoption rates continued to climb to see healthy growth as each of the country’s three national carriers, China Mobile (NYSE:CHL), China Unicom (NYSE:CHU) and China Telecom, announced their annual results and saw a growing number of 3G net additions.
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China’s burgeoning mobile market is close to a billion subscribers now. Out of a total of 999.7 million mobile phone users, China now has about 144 million 3G subscribers. While this 14.4% penetration is still low, it is more than double the penetration levels we saw a year ago. The low but growing 3G penetration gives smaller wireless carriers such as China Telecom and China Unicom ample opportunity to compete with the behemoth that is China Mobile.
China Mobile has more than thee times as many overall mobile subscribers as second-placed China Unicom and is the world’s largest wireless carrier by subscriber base. But when it comes to 3G, the difference is not nearly as high. As of February, China Unicom had around 46 million 3G subscribers to about 41 million on China Telecom’s and 57 million on China Mobile’s 3G network.
The healthy growth in 3G demand is being driven by the heavy smartphone subsidies that the carriers provide in return for long-term contracts. All the three of them released their earnings over the course of the past week, which showed the impact of this on their EBITDA margins as well as ARPUs.
China Mobile’s EBITDA margins fell 2% over the previous year, while China Unicom’s dropped even more sharply by 4.4%. Only China Telecom saw a less steep decline in its EBITDA margins, which fell by only 0.6%. A big reason for the industry-wide decline was a heavy increase in subsidies and marketing spend, as the carriers tried to promote 3G and transition their huge 2G base to 3G. At the same time, however, data ARPU levels continued on their ascent upwards, offsetting the decline in voice revenues and acting as a greater support to the overall ARPU levels. (see China Telecom’s Results Show Faster 3G Adoption and Slimmer Margins and China Mobile Primed for $58 as China’s Smartphone Market Blossoms)
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