3G Sales Will Climb Slowly

Chinese Mobile Phone Providers Should Promote a Compelling Experience, Not Speed

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BEIJING (AdAgeChina.com) -- Despite getting off to a slow start, 3G will eventually take off in China. The IT research company Gartner predicts Chinese cell phone users will buy almost 155 million 3G mobile devices by 2013, representing nearly 40% of sales that year.

Since 3G services were launched in China in January 2009, all three communications services providers, China Mobile, China Telecom and China Unicom, have launched low-cost 3G devices to attract subscribers and increase revenues in the world's largest cell phone market.

China added 9.22 million mobile phone users in January 2010, bringing the total number of mobile phone users there to 756.60 million, said the Ministry of Industry and Information Technology.

However 3G sales fell far short of expectations, accounting for only 8.36% of total sales last year, and consumers who bought low-cost 3G phones did not generate greater average revenue per user than existing 2G users. As a result, all three service providers set very high targets for 3G user acquisition -- and failed to meet them.

"The launch of 3G in China in 2009 was hotly anticipated, with many people expecting sales of 3G devices to boom in the first two years, but they were too optimistic," said C.K. Lu, senior research analyst at Gartner in Taipei.

"If we look at other Asian countries such as Japan and South Korea, 3G sales took three to five years to reach 80% of total sales. We're going to see a similar pattern in China."

Chinese will buy 35 million 3G phones this year
In the second half of 2010, China Mobile, China Telecom and China Unicom are expected to shift their focus to 3G smartphones with sophisticated operating systems. Those phones, providers hope, will increase revenue through data subscriptions, application sales, deals with content developers and value-added services such as navigation and music subscriptions.

Gartner forecasts that 3G mobile devices will account for 12.65% of total sales, reaching nearly 35 million units in 2010.

Chinese consumers do have a general awareness of 3G, Mr. Lu said, but are not sure exactly what it can do for them other than offer video calls. "In western markets, the mistake of promoting speed, which is both misleading and unhelpful, was made repeatedly. [Mobile phone service providers in China] should now be trying to define a compelling 3G experience."

Last year, they had the opportunity to learn from earlier 3G launches in other markets, but didn't, he added. "In 2009, they were so busy promoting 3G products that they failed to explain the 3G services. As a result, the 3G experience remains unclear to Chinese consumers. Without a clear understanding and compelling 3G applications, people will continue to use their phones mostly for voice calls and SMS texting."

In 2010 Gartner expects WCDMA to remain the mainstream technology in the Chinese 3G market. This will allow foreign vendors to easily bring their existing 3G products to China without having to extensively customize them. TD-SCDMA sales will take advantage of China Mobile's heavy subsidies, both for manufacturers and end users. However, vendors may be slow to offer "China-only" TD-SCDMA models, which are not compatible with 3G services in other markets.


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