Until just over a year ago, Gong Kangshun spent much of his life trekking over the mountains around his remote village in southwest China. It isn’t easy making a living in Xiuxi, a tiny settlement of 58 families deep in Aba County, Sichuan Province. Gong grows crops on a small plot and sells rare fungi found on the steep slopes nearby. Many young people, including his brother, leave to find work in the factories and shops of eastern China.
But a single purchase has shortened his working hours and sent his income soaring — by helping him to find buyers for his fungi. It has even improved his relationships with family and friends.
“I’d panic without my mobile phone,” the 35-year-old admits.
Across China, tens of millions have similar tales to tell. Many had never enjoyed phone access until recently. Now, for a small outlay, they can buy a handset, slot in a pre-paid sim card, start calling — and change their lives.
Most, like Gong, can thank one firm: China Mobile. With more than 70 percent of the domestic market it has 518 million subscribers, more than any other mobile carrier on the planet.
It is the world’s largest phone operator by market value and the largest Chinese company listed overseas. Its work on 4G technology and its interest in foreign acquisitions suggest its international profile may soon grow.
Already the company’s influence is rippling out across the world, almost unnoticed. The rapid spread of mobiles, facilitated by the company’s high-speed network roll-out, is both a product of China’s aggressive development and a contributor to it — accelerating the pace of life and business, and shrinking distances.
Some activists are enthusiastic about the potential for mobiles and the Internet to expand the flow of information in a country with heavy censorship. They point to cases where camera phones have captured and shared images of unrest or official abuse.
The authorities certainly seem to be aware of the potential — Chinese social networking sites are strictly controlled and overseas services such as YouTube are blocked. In restive Xinjiang, text messaging was turned off after vicious ethnic violence. The authorities also use mobiles for everything from political education to monitoring individuals.
A PART OF LIFE
The social and political effects of new technology are rarely straightforward, but for most people, mobiles are simply a part of life.
Whether a highly paid Shanghai executive or an independent farmer-cum-trader such as Gong, no one can afford to be without a phone — or a signal. China Mobile’s 500,000 base stations now cover 98 percent of the population. You can call home from city subway trains, distant fields or the peak of Mount Everest.
“If you have a requirement, we will have coverage,” pledged Wang Jianzhou (王建宙), the firm’s chairman and chief executive, who has more than three decades of experience in the sector.
“When we started this business we thought very few people would use mobile phones — only the rich,” he said.
Now he is dissatisfied with a penetration rate of 57 percent: “I think every adult should have at least one mobile ... they are an extension of human ears, eyes and mouths.”
Before the network reached Xiuxi in late 2008, Gong used the phone perhaps twice a month. Each time he would walk for an hour to the nearest landline to call traders interested in buying the valuable “caterpillar” and “sheep stomach” fungi used in Chinese medicine.
“Now, on a busy day, I might make 20 calls,” he said. “I can contact buyers in Chengdu and Shanghai. I can do business sitting at home and buyers can reach me, too.”
His income has risen 50 percent to 20,000 yuan (US$2,900). And instead of walking seven hours a day to find the fungi collectors, he can call and ask them to deliver.
In his spare time, he chats to his younger brother, a chef in Zhejiang Province who comes home at most once a year.
Villagers hear a lot more news from the outside world these days — even Gong’s 14-year-old son has his own phone. In 1997, there were just 10 million mobile users in China; by 2005, China Mobile had 240 million. Since then it has more than doubled.
The government pushes all carriers to serve the poorest. But since taking charge at China Mobile in 2004, Wang has shown skeptics that focusing on rural areas is a viable business strategy.
“Many analysts and investment bankers told me: Never go to rural areas because they are low revenue. You will not make a profit,” Wang said, in an interview at his spacious but low-key office in the company’s headquarters on Beijing’s Financial Street.
“I didn’t believe that ... with fixed lines, providing rural services is very, very difficult and expensive. [We have] low average revenue per user — but also low costs,” he said.
With a penetration rate of just 37 percent, there is plenty of room for growth among China’s rural population of 700 million. And there is plenty of demand.
In Yangcun County, close to Beijing, Chen Fengmei anxiously scrolls through her latest text message: advice from officials on how the day’s weather will affect her tomato crop. Another villager, Li Chunyu, checks the latest market prices for his pigs, no longer needing to trust middlemen or to give them a cut of his profits.
“I never need to go anywhere. I can stay on the farm and find out everything,” he said.
Some wonder whether China Mobile’s success is down to business acumen or simply that the Chinese government owns a stake of more than 74 percent. Public investors hold the rest — the firm is listed in New York and Hong Kong, where it is technically domiciled.
“We are all wondering whether China Mobile really has the mojo, or whether whatever position it has is really a government favor,” said David Wolf of corporate advisory firm Wolf Group Asia. “I think China Mobile would argue they have been victims of disfavor in recent years ... the fact the company didn’t simply implode suggests a lot of good inside the organization.”
In 2008, officials reorganized the telecoms sector, strengthening competition and awarding the firm the least mature of the 3G standards.
China Mobile had previously snapped up 83 percent to 88 percent of new subscribers, said Mark Natkin, managing director of Marbridge Consulting, a Beijing-based telecoms and IT specialist. As its rivals settled down, that share rose. But by October last year, it had fallen to 56 percent.
“Now there are three players and the market is very, very competitive,” Wang said. “We think its normal that we have a reduced share of new subscribers. But the total market still has big potential.”
COSTS
The costs of introducing 3G and the impact of the global downturn contributed to the firm’s only fall in profits for a decade, in the second quarter of last year. Although profits have rebounded, the slight year-on-year rise to 28.6 billion yuan in the third quarter was less than analysts had predicted.
Last week also saw unwelcome news when China Mobile sacked its vice chairman, Zhang Chunjiang (張春江), citing alleged serious financial irregularities. He had earlier been sacked by the parent company, according to state media. China Mobile said his removal would have no material effect on the business; reports suggest the claims relate to Zhang’s previous job.
The company’s mid to long-term prospects depend on customers like pig farmer Li making more frequent and longer calls and using data services — as Wang tacitly acknowledges when he remarks that “we hope all mobile phones will become smart phones.”
Li’s 20 to 30 calls a day bring in little income for China Mobile; perhaps 2,000 yuan a year. Even that is double the average.
“I know you can use mobiles for other things besides calls and texts, but I don’t know how,” he confided. “Sometimes I look at their screens and feel a little dizzy.”
The good news for China Mobile is that his children and their friends are using their phones to browse the Web, play games and watch videos. But customers may be tempted to turn away from the firm as they trade up. The company is heavily promoting its 3G service launched last January, and in November almost 3 million people used the network, which serves 70 percent of cities.
CATCHING UP
Yet China Unicom, which launched its 3G network in October, is catching up fast, with a million users in its first month. China Mobile must fight off strengthened competition with the domestically developed TD-SCDMA (time division synchronous code division multiple access) standard.
Some wondered if the firm missed a trick when it failed to reach a deal for the iPhone, now available through China Unicom. Wang says it is still negotiating with Apple and highlights a deal for a TD-SCDMA BlackBerry as “very big progress.” Yet he is noticeably unenthusiastic about 3G.
“It’s a very difficult job to operate TD-SCDMA because no other operator has used it before. But China Mobile has big experience in rolling out and maintaining networks,” he said. “It’s difficult but we think we can reach our target. And TD-SCDMA does have advantages — easy migration to LTE.”
TD-LTE (long term evolution) is a 4G standard offering super-fast downloads, which China Mobile will trial at the World Expo in Shanghai this year.
Wang foresees 4G products on the market within three years and says overseas operators are already interested.
“It’s expected to be a much stronger competitor,” Natkin confirmed. “TD has always been playing catch-up. In the 4G arena China is actually at — if not ahead of — the starting line.”
China Mobile hopes to extend its reach in other ways. In 2007 it bought Pakistan’s Paktel, now renamed ChinaMobile Pakistan and branded as Zong.
Wang describes the telecoms market there as “very competitive” and “difficult.” But he sees the purchase as a first step in international expansion and his eyes gleam at the prospect of snapping up other overseas carriers.
The chief executive, who spoke fluent English throughout the interview, has fostered relationships with his peers abroad and watches them closely.
“We are trying to find other opportunities for acquisitions, but it’s not easy. We are waiting for opportunities whether in developed or developing countries,” he said.
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