On May 26, 2008, the Chinese government unveiled plans for a comprehensive restructuring of its mobile space, a change that is expected to level the competitive landscape and pave the way for 3G technologies in China.
The current market is divided between two key players: China Mobile, with two-thirds of the mobile subscriptions (a total of 376 million subscribers), and China Unicom, with the remaining third (121 million subscribers). In the new scenario, China Unicom will be broken up, its networks divided between China Netcom, which will receive its GSM network, and China Telecom, which will be given its other CDMA. China Mobile will merge with China Tietong, a fixed-line operator, to create a third. Each new entity would then receive licensing for one of three 3G standards, ushering in the next generation of mobile technology.
It is clear that the Chinese government seeks to use 3G and its TD-SCDMA technology as a platform to balance the mobile market, providing an opportunity for domestic brands to make up lost ground. Currently, foreign manufacturers Nokia, Samsung, Motorola, and Sony Ericsson account for a 69% market share in China, attracting status-driven, top-tier consumers with their brand names, while maintaining a hold on low-end markets with the affordability of their devices.
At the same time, many of the most successful service providers from Japan and Korea view China as their next target, particularly with regards to content management. The popularity of mobile reading in Japan and Korea has spawned an emerging market in China, and mobile music innovations, like ringtone design software and karaoke applications, are proliferating as well. Naviblog, a Japanese leader in mobile blogging, social networking, and virtual worlds, is currently in the process of bringing its technology to China. And device manufacturers like Samsung and LG have incorporated Chinese-Korean electronic dictionaries and bilingual application support into their latest models, in an effort to unify the region, at least commercially.
In cities like Shanghai, Beijing, and Shenzhen, which have close to 100% mobile penetration, the battle for consumers has already been won by these foreign brands. But a fresh battleground remains in rural China, which accounts for more than 700 million Chinese. This rural market has a mobile penetration rate of only 12%, leaving tremendous opportunity for growth. As companies scramble to differentiate themselves in the forthcoming 3G-enabled marketplace, a renewed emphasis will be placed on content-based, user-oriented services. And while China’s content services sector remains low in advanced technologies, it has proven notoriously difficult to crack for foreign firms.
Success requires a keen understanding of the country’s changing cultural dynamics, where increased affluence, a breakdown of traditional family relationships, and an aging population have created a unique set of user needs. How well these issues are understood and analyzed will determine which services appeal to the Chinese consumer. It’s not about business as usual, but about how businesses can apply their technologies to the specificities of the Chinese market.