China's mobile phone market, which is growing about 20 percent annually, will probably displace the US as the world's largest by the end of this year, faster than expected, analysts said.
China, which is adding about 5 million new users every month, should have about 150 million subscribers by the end of 2001, when it will overtake the US, said Leon Chik, an analyst with Dresdner Kleinwort Wasserstein. Official Chinese figures on the local market and growth rates tally with data on China Unicom Ltd.
the listed unit of China's second-largest operator.
"China Unicom's listed unit has 16 percent of the market with 16 million subscribers," Chik said. "They've been adding about 1 million subscribers each month, so that's pretty much in line with official statistics on growth." While the US market is almost saturated with about one cell phone for every two people, China's market is growing at a faster rate. The nation's 100 million wireless subscribers represent less than 10 percent of its 1.4 billion people.
Reaping Benefits Earnings of China's mobile phone operators should outperform those of companies in other nations because China is investing mainly in cell-phone networks, which are cheaper to build than fixed-line networks, said Niq Lai, an analyst with Credit Suisse First Boston in Hong Kong.
"Mobile will exceed fixed-line networks in China in two years," Lai said. "The capex per subscriber will be much lower." Still, analysts sound a word of caution. Prepaid users, who buy stored-value cards that work together with mobile phones, account for about a quarter of the China market. The use of such cards limits subscriber expenditures and revenue for China's mobile phone operators.
Average revenue for China's two nationwide service providers will fall as a result, said analyst Chik, who currently has "buy" recommendations on both companies.
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