China's "big four" telecom firms' future fortunes will depend greatly on their performance in rural markets, as they have reached saturation point in urban areas, according to industry analysts.

 

This situation will remain until the mainland issues its first batch of third-generation (3G) licences, which is unlikely to occur until early next year.

 

"The trend is very clear," said Tang Li, a senior research analyst at Pacific Crest Securities. "They have to tap the potential in rural markets for further development."

 

"They must win more new subscribers in order to make up for a falling average revenue per user," said Gordon Wong, an analyst with South China Research.

 

Falling charges mean that mobile users have recently been spending less on calls, making it essential for the firms to add more new users in order to maintain their high earnings growth, explained Wong.

 

In the first six months of the year, China Mobile, the world's largest cellular operator in terms of both users and market value, outperformed China Unicom, the smaller of the mainland's two mobile operators, recruiting 80 percent of new subscribers, many of which were in rural areas.

 

This aggressive rural expansion contributed greatly to China Mobile's 25.5 percent year-on-year rise in net profit in the first half of 2006, beating China Unicom's 20 percent.

 

Analysts do not expect China Unicom to regain its lost ground in the second half of the year.

 

China Mobile's full-year profit may jump 24.4 percent to US$8.2 billion, while China Unicom is likely to post 14 percent growth to US$693 million, according to a median of eight analysts in Hong Kong and Shenzhen surveyed by China Daily.

 

In comparison, China Telecom and China Netcom, the two fixed-line operators, failed to boost their rural business in the first half of the year.

 

"Slow progress in rural markets and competition from mobile operators squeezed the duo," said Tang.

 

(China Daily September 22, 2006)