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China Mobile to cover 98% of villages

By Zheng Lifei (China Daily)
Updated: 2009-07-15 08:30

A China Mobile base station in the Tibet autonomous region. The telecom operator will invest 70 billion yuan in the next three years to expand its rural coverage. [CFP]

China Mobile will invest 70 billion yuan ($10.25 billion) in the next three years to build and upgrade its networks in the country's vast rural areas and promote the application of its 3G services in the countryside, as part of efforts to seek new growth engines amid slowing subscriber growth.

The world's largest mobile carrier by number of users said it would add at least 10,000 natural villages to its network coverage every year in the next three years.

China Mobile's network coverage will blanket at least 98 percent of the country's more than 5 million natural villages by the time the plan is complete, according to an agreement the company inked with the Ministry of Agriculture yesterday.

The mobile carrier said the agriculture ministry would help it promote the adoption of its TD-SCDMA 3G mobile technology-enabled applications in the country's vast countryside and in the ministry's subordinates, a boost to China Mobile's 3G services.

But the mobile carrier did not say whether the 70-billion-yuan investment was new or if it had been included in its previously announced investment pacts with local governments in the past several months.

The move comes amidst slowing subscriber growth and increasing competition from the nation's two other telecom carriers, and right in the middle of an economic downturn and the launch of the country's 3G services earlier this year.

Yesterday's move is also part of "China Mobile's fulfillment of corporate responsibility as a major State-owned enterprise to narrow the 'digital divide' between urban and rural areas", Chairman Wang Jianzhou said.

The telecom behemoth had 435,000 outlets in rural areas at the end of last year.

China Mobile added 199.1 million new subscribers in the first quarter, 1.23 million lower than that in the same period a year ago.

It added 88 million users in 2008, more than the 80 million the company expected; but its new additions may drop by 25 percent to 66 million this year as competition from China Telecom and China Unicom intensifies, Tim Smart, an analyst at Macquarie Group, wrote in a research report.

The country's telecom carriers have in the last few years started to woo customers in small towns and rural areas as subscriber penetration is saturating in big cities.

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And, starting this year, the three carriers are focusing on 3G services, which all of them launched this year, as part of their search for new growth engines.

But China Mobile, which adopted the homegrown TD-SCDMA standard 3G services, is likely to encounter fierce competition in 3G services from its two rivals as they use more mature standards, analysts said.

"The revenue growth at China Unicom and China Telecom is likely to pick up pace as a result of the 3G rollout," said Fang Lu, a telecom industry analyst at Shenyin & Wanguo Securities.

China Mobile has since 2004 spent a total of 19.5 billion yuan in expanding its mobile network coverage to 683,000 administrative villages, or 98.98 percent of the nation's total, the company said.

China Mobile's first-quarter net profit growth slowed to 5 percent from an 11-percent increase in the fourth quarter, the lowest since 2005.