Skate boards and DJs....Is This Really China Telecom?

Fixed-Line Giant, Now Part of China's 3G Market, Seeks 100 Million Subscribers by 2011 by Appealing to Youth Market With Campaign by Euro RSCG

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BEIJING ( -- As the smallest and least experienced player in China's mobile phone market, China Telecom Corp. is going back to school.

The telecom company hopes to attract college students, many of them first-time mobile phone users, with entry-level handsets that sell for as little as 500 RMB ($73), far less than the company has been charging since launching its 3G service in March 2009.

China Telecom is marketing student-friendly prices and service packages with a major ad campaign centered around China's university campuses -- a far cry from its image as a stodgy former state-run conglomerate providing old-world fixed line services.

"Chinese student mobile consumers are a fickle demographic with a wide range of individual mobile and 3G needs," said Beijing-based Tammy Sheu, group managing director for northern China at Euro RSCG, the agency that created the advertising.

Media buying was handled by another Publicis Groupe agency, Starcom MediaVest, while digital marketing was developed by WPP's Neo@ogilvy division.

"The 3G category is still relatively new, so a crucial part of this campaign was reaching out to students on their own turf and creating a dialogue that is clear, fun, and easy-to-understand."

Service costs as little as $3
Fun, edgy and colorful ads running in TV, print, outdoor, online and point-of sale media promote China Telecom's "Tian Yi" e-surfing product. The tagline sounds like the Chinese words for "come together," but also includes the Chinese character for "wings," changing the meaning to "flying together." In the ads, animated versions of college-age kids, who look western rather than Chinese, ride skate boards and spin discs on a DJ turntable, images China Telecom hopes will resonate with today's young Chinese.

"The idea is that while students are ready to take off into a new world and phase of life, 3G allows consumers to enter a whole new realm through the opportunities it opens up," said Lily Li, a senior account director at Euro RSCG, Beijing.

China Telecom's Tian Yi Service costs as little as 19 RMB ($2.78) per month for basic services and 59 RMB ($8.63) for full internet access. The service includes other features aimed at students, such as a phone number that doubles as an e-mail address.

Teaser ads appeared in mid-July to reach students during the summer holiday, and the campaign launched Sept. 1 and will run through mid-October.

China mobile users to 700 million
China Telecom is the largest fixed-line operator in China, but that's a market of increasingly small returns. The number of mobile phone users in China surpassed 700 million by the end of July 2009, double the total U.S. population, as more people switched from fixed-line phones, according to the Ministry of Industry and Information Technology.

"Youth are very open to new things and aren't afraid of change"
During the first seven months of this year, China added 61.40 million new handset users, bringing the total to 703 million. Meanwhile, the number of fixed-line phone users in China fell by 12.41 million to 328 million.

Unsurprisingly, China Telecom jumped at a chance to win one of the country's 3G licenses issued in January 2009 despite the company's lack of experience in mobile services. China's mobile market has grown steadily for years, both in subscriber numbers and revenue.

Overall telecommunications revenue in China reached $69.9 billion during the first seven months of this year, a 2.6% year-on-year increase, as broadband, mobile and related services income increased.

But all three license winners -- China Telecom, China Mobile and China Unicom -- are having trouble convincing enough Chinese to sign up for 3G subscriptions, even as they invest in infrastructure, handset subsidies and expensive marketing campaigns.

China Telecom reported first-half net profit fell 29% from a year earlier. China Unicom's profit plunged 42% during the same period. Profits for China Mobile dropped in the second quarter of 2009 for the first time in a decade.
Stiff competition and slow payback are prompting the rivals to fine tune their approach.

China Telecom, which is particularly strong in southern China, is going for rural and new users to reach its wildly optimistic target of 100 million mobile subscribers by 2011.

"There are several reasons to target the youth, one is that the youth are very open to new things and aren't afraid of change, so they are ideal for trying something new like 3G. Secondly, the youth demographic change phone numbers more often, so they are a segment with good growth opportunities when it comes to switching providers," Ms. Li said.

Saddled with TD-SCDMA, a locally developed mobile phone technology unique to China and therefore not compatible with most foreign-made handsets, China Mobile is banking on its reservoir of subscribers who don't want the hassles of getting a new number if they change services.

China Unicom, which is strong in major urban areas like Shanghai, trumped the nation's mobile phone leader by clinching a deal with Apple to bring the iPhone to China, a move that will appeal to affluent, urban phone users.

3G needs to appear sexy not functional
China Telecom may be the smallest mobile phone operator but its CDMA-2000 technology is compatible with foreign handsets and it has strong name recognition among Chinese. Of the 242,000 3G handset units sold in China during the second quarter of this year, about 131,000 were bought by China Telecom subscribers.

"Almost 90% of campus users are with China Mobile, so the challenge is to get them to switch [to China Telecom], and that's why there is such a strong youth push at the moment," Ms. Li said.

"Another challenge is that youth are more focused on having a trendy mobile device over functionality," Ms. Li said. That's why China Unicom's deal with Apple is such a threat to China Telecom and China Mobile.

"The iPhone is an iconic device, and in China it represents fashion and trendiness and good technology. However, it remains to be seen how many people buying the iPhone will use it for 3G services. A lot of people will buy the iPhone for fashion, but will only use it in a 2G capacity," she said.

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