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With major global telecom players gathering at ITU World Telecom 2006, an industry jamboree in Hong Kong this week, many people might forget that not so long ago, it was almost impossible to make telephone calls in the Chinese mainland.

 

But such a harsh memory is still vivid in Lin Yifu's mind, even though China has now grown into the world's largest mobile phone market.

 

In 1979 when Lin came to the Chinese mainland from Taiwan Province, his birthplace, he found that making telephone calls was extremely annoying.

 

At that time, "when I tried to call my friends (in Beijing), it often took more than two hours to get through," recalled Lin, who studied in Peking University during 1979 and 1982 and is now one of the best-known economists in the Chinese mainland.

 

"My friends said they would rather I go to their offices to talk with them in person than wasting time trying to call."

 

The difficulties stemmed from few telephone users at the time and relatively new technology with a limited capacity.

 

Fast pace

 

But things have changed dramatically. In 2001 China became the world's largest mobile market by subscribers. And the growth has not shown signs of slowing down.

 

By October this year the country had 370 million fixed-line telephone users and 449 million mobile phone subscribers, making the country a lucrative market most telecom players cannot afford to lose.

 

During the January-October period, 19.7 million new fixed-line users and 55.6 million mobile subscribers were added in the country, according to the Ministry of Information Industry (MII).

 

The telecom boom has spawned some world-leading operators in China such as China Mobile, which reported an annual revenue of 243 billion yuan (US$30.4 billion) last year. In 2005, the revenue generated from telecom services in the country totalled 577.9 billion yuan (US$72 billion), an increase of 11.7 percent year-on-year.

 

"This year, the figure could hit US$80 billion," said Zhu Gaofeng, an academician with the Chinese Academy of Engineering and former vice-minister of Posts and Telecommunications.

 

"Compared with other industries such as manufacturing, aviation and railways, the pre-tax profits in the telecom industry have always been much higher."

 

That is largely due to the ever-growing and robust demands for telecom services in the country, whether they are fixed-line services, mobile phone services or even the limited mobility PHS (Personal Handyphone System) services.

 

For instance, although China has become the world's largest mobile phone market, a large portion of the population has yet to own a phone.

 

"China is (still) an emerging market because there is a lot of potential for new penetration," said Olli-Pekka Kallasvuo, chief executive officer of Nokia, the world's largest cellphone maker.

 

Kallasvuo predicted the number of China's mobile phone subscribers would hit 600 million by 2010, which could unleash big opportunities for operators as well as manufacturers of telecom equipment and handsets.

 

And even in the big cities where mobile phone penetration is nearing saturation, a big number of mobile phone users are replacing their handsets with new ones with advanced features.

 

Nokia estimates that the replacement market accounts for about 55 percent of the total handset market and the figure could grow to 80 percent by 2010.

 

A recent report by a Beijing-based research house Analysys International predicted unit sales of mobile phones in China could grow at a compound annual growth rate (CAGR) of 9.38 percent during 2006 and 2010. In 2010, 138.2 million handsets would be sold in China, it said.

 

Economist Lin Yifu is even more optimistic. "By 2020, 80 out of 100 people in China will own a mobile phone," he said, adding total mobile phone subscription would hit 1 billion by 2020.

 

That will form a cellular market even bigger than a combined market of the United States, Japan and Europe.

 

By October, mobile phone penetration in China stood at 33.9 percent.

 

"The continuing dropping prices of both mobile phones and telecom fees would make it possible (to grow the number of mobile phone users to 1 billion by 2020)," said Lin.

 

The economist predicted that China would maintain an annual economic growth of 9 percent in the coming 15 years, while consumption would grow no less than 7 percent each year.

 

A significant number of money would be spent on telephone services. "Personally I expect China's per capita GDP (gross domestic product) to reach US$6,320 by 2020 (compared to a government's forecast of US$3,000), if we take the possible appreciation of Renminbi in the coming years into consideration," said Lin, adding the income increase will result in increasing demands for content-related telecom services as well as higher value-added services.

 

(China Daily December 4, 2006)