The Analysis of Mobile Communication Service

As a huge country with a 1.3 billion population, China is an unbelievable potential market for each industry. Of course, MCSS is not an exception. The number of mobile customers in China reached 393 million at the end of 2005, compared to 145 million in 2001 (Figure 2.1), and Ministry of Information Industry of China, (MIIC) estimated the number would hit 440 million in 2006. [1] In the past five years, the revenue of MCSS has increased at a high rate. In 2005, the revenue of MCSS was which covered 45.1 percent of the total revenue of TSI with an impressive growth rate at 17.2 percent. [1]

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In China, MCSS is still a new industry, started in 1994. In the history of MCSS development, there are two events that should be remembered. One milestone is the foundation of China Unicom Group in 1994. The other one is the setup of China Mobile Communications Corporation (China Mobile for short), which, at the beginning, was just a sub-operation department of China Telecom Group until it was split from the original group and became China Mobile in 2000. Since TSI is a nationalised industry, both groups are directly under the central government. Therefore, before the government decides to open the mobile communication market to foreign companies, these two corporations will continue competing in the market and sharing the big “cake”. In 2005, China Mobile captured 65 percent of the market and China Unicom took up the rest 35 percent.[2]

Next, I will talk about the environment of MCSS to find out which factors effect the development of the industry and how they do so. 3 Remote Environment Remote environment involves components which an individual business has no significant influence over, but which can have a major effect on the business. It is likely to be similar for all competing businesses operating within the same national economy. (Finlay, P.N., 2000) The reason why I discuss the remote environment is that the general changes in the operating environment, which I will talk about later, that most concern businesses lie in it. A company cannot be successful without considering the big picture of the society.

Here, I use a PEST analysis to investigate the remote environment of the MCSS. The four elements constitute the PEST checklist: Political/legal, Economic, Socio-cultural, and Technological. In the following part, I will discuss these four elements respectively. 3.1 Political/legal China’s strategy of economic development is described by the term socialist market economy. This means using market forces to improve the efficiency of production while retaining a managed, predominantly state-owned economy and authoritarian control over political activities. (Mueller, 1997) In China, MCSS is a state-owned industry. Therefore, the policies settled by the government have a significant influence on the development of this sector.

World Trade Organisation (WTO) On 11 December 2001, after 15 years negotiation with WTO and other countries, China became a member of WTO. According to the WTO agreement, from then on, contractual joint ventures in MCSS have been allowed in Beijing, Shanghai and Guangzhou, which means that foreign companies can take part in operations and get involved in basic telecommunication services. Foreign companies may hold no more than 25 per cent of the total equity. In 2007, the proportion will rise to 49 per cent and there will be no geographical restriction.[3]

As China gradually opens its MCSS market, more and more foreign rivals will enter with mature service system and advanced technologies. This will bring opportunities and challenges to the developing local companies. Although the government may still want to retain the traditional levers of control over national industrial policy and political and social communication associated with the monopoly structure of the past, some challenges emerged because of the changed policy: Although there are many policies utilised to regulate the telecommunication market, there is still no national law to setup clear regulation for the players in this industry.

The government realised the problem and started the legislation several years ago, however, the draft of the law will not be sent to the committee of National Congress for deliberation until August, 2006. [4] Now, people all expect that this law could give clear detailed answers to some hot spots of the industry, such as contractual joint ventures of foreign companies, anti-monopoly, monthly rent fee and so on.

Nowadays, the charge of mobile communication is still double-way, which means the caller and receiver both pay for the call. In 2004, both China Mobile and China Unicom promoted their pay as you talk brands by using one-way charge, but later, MIIC considered this as a kind of negative price war and called it off. In 2005, there was another role of discussion about one-way charge policy. At customers standing point, obviously, one-way charge is warmly welcomed because of the lower cost, but service suppliers want to charge double-way to maintain their profit. Therefore, how to balance the demand of two parts is the responsibility of the government. According to the spoke person of MIIC, analysts believe that in the short future, one-way charge policy will be carry out in China. Since lower cost will increase the frequency of use of mobile, the profit of companies will not decline significantly.

For all industries, the general economic climate of the country, or even the world, is very important. In the past decade, China’s economy has grown at a rapid rate since the government decided to carry out the policy called “reform and opening”. In the past five years, GDP of China increased from 903.6 billion to 1293.1 billion. Therefore, in 2005, China took the fourth place on the GDP ranking list of the world. Compared to the average world GDP growth rate, around 3% per year, the average growth rate of China in these five years was 9.48% per year.

In the recent three years, the rates were stupendous at 10%, 10.1% and 9.9% respectively.[5]  The prime minister of China, Wen Jiabao, claimed the average GDP growth rate would be 7.5% per year in the next five years. Based on this data and economic environment in China, I believe the economy of China will have stable growth in the future, which will provide a steady platform for the development of MCSS.