Wireless Penetration In China Slows Raising Concerns For The Big Three

by Trefis Team
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China Unicom (NYSE:CHU) and China Mobile (NYSE:CHL) recently released its operational data for December. China Unicom announced net additions of 3.12 million 3G users for Dec 2012 to end the year at 76.456 million users while China Mobile added a staggering 5.5 million 3G users in Dec for a total of 87.9 million. Interestingly net addition of 2G users has turned negative for both carriers with China Unicom losing nearly 33 thousand 2G users and China Mobile losing 2.47  million 2G users. We feel going forward this would continue as existing 2G subscribers upgrade to 3G and new subscribers preferring the 3G.

See our full analysis for China Unicom’s stock here

 

China Mobile

China Unicom

Total 2G Users Net Additions 2G Total 2G Users

Net Additions 2G

Jan-12

601.494 3.138 159.823 0.182

Feb-12

604.809 3.315 160.073 0.250
Mar-12 607.632 2.823 160.627 0.554

Apr-12

610.606 2.974 160.968 0.341

May-12

613.225 2.619 161.338 0.370
Jun-12 615.997 2.772 161.719

0.381

Jul-12 618.975 2.978 162.046

0.327

Aug-12

620.937 1.962 162.382 0.336
Sep-12 622.913 1.976 162.624

0.242

Oct-12 624.156 1.243 162.814 0.190
Nov-12 624.840 0.684 162.892

0.078

Dec-12 622.370 -2.470 162.859

-0.033

 

China Unicom Declining 3G User Addition

While we were expecting net additions of 2G users to decline and eventually turn negative, it is a matter of concern that net 3G additions for China Unicom have plateaued. The inconclusive talks between the head honchos of China Mobile and Apple (NASDAQ:AAPL) CEO Tim Cook, regarding iPhone 5 was considered a huge boon for China Unicom and China Telecom. At present these two carriers have exclusive access to iPhone users in China.

We expected China Unicom to benefit from this at the expense of China Mobile. However, the December numbers show that China Mobile was not that affected by lacking the iPhone on its network and thus disrupting market expectations of China Mobile to lag the other carriers in 3G additions. We will be watching January subscriber numbers closely to determine if the jump in 3G additions for China Mobile is an anomaly, and if not, it indicates declining prowess of Apple, China Unicom and China Telecom in the 3G market.

 

 

China Mobile China Unicom
Total 3G Users Net Additions 3G Total 3G Users

Net Additions 3G

Jan-12

53.942 2.730 43.069 3.050

Feb-12

56.588 2.646 45.894 2.825

Mar-12

59.563 2.975 48.860 2.966

Apr-12

61.870 2.307 51.778 2.918

May-12

64.262 2.392 54.504 2.726

Jun-12

67.079 2.817 57.530

3.026

Jul-12 68.980 1.901 60.617

3.087

Aug-12 72.140 3.160 63.686

3.069

Sep-12

75.595 3.455 66.863 3.177

Oct-12

79.312 3.717 70.067

3.204

Nov-12 82.429 3.117 73.324

3.257

Dec-12 87.928 5.499 76.456

3.132

 

Is the Chinese Wireless Market Approaching Saturation?

On analysis of the operation data, we see a trend in decline of net additions of total users for both China Unicom and China Mobile. We suspect this is an indication of China’s wireless market fast approaching a saturation point. With net additions of 2G users turning negative in December, we will continue experiencing declining net additions of wireless users with the possibility of the wireless market experiencing saturation later this year.

China Mobile

China Unicom
Total Wireless Users Net Additions Total Wireless Users

Net Additions

Jan-12

655.436 5.868 202.892 3.232

Feb-12

661.397 5.961 205.967 3.075

Mar-12

667.195 5.798 209.487 3.520

Apr-12

672.476 5.281 212.746 3.259

May-12

677.487

5.011 215.842

3.096

Jun-12

683.076 5.589 219.249 3.407

Jul-12

687.955

4.879 222.663

3.414

Aug-12

693.077

5.122

226.068

3.405

Sep-12

698.508

5.431 229.487

3.419

Oct-12

703.468 4.960 232.881

3.394

Nov-12

707.269 3.801 236.216

3.335

Dec-12 710.298 3.029 239.315

3.099

 

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