【正文】 CONFIDENTIAL China’s Mobile Tele Services Industry Overview GCO Practice Development May 2022 This report is solely for the use of Firm personnel. No part of it may be circulated, quoted, or reproduced for distribution without prior written approval from McKinsey amp。 Company. 02 PD China Mobile Teles Service Industry 1 ACKNOWLEDGEMENTS AND REFERENCES MGMs and CSS involved in the relevant studies include the following: Tony Perkins (BEI) Stefan Albrecht (BEI) Chipper Boulas (HKO) Peter Kenevan (TOK) Perchow Joseph Chang (SHA) Andrew Wu (HKO) Hai Wu (BEI) Jane Xing (HK) Yi Feng (BEI) Sheng F Li (SHA) Yoshinobu Takanuki (TOK) Graeme Hunter (JOH) Julia Yang (BEI) Eric Xu (BEI) Jason Liu (BEI) Shirley Chen (BEI) The series of PDs include the following: China Macroeconomic Environment China’s Mobile Tele Service Industry Overview China’s Inter Industry Overview China Tele Equipment and Services Overview China’s Mobile Handset Sector Overview China Tele Industry Regulatory Overview Key Success Factors and Case Studies of MNCs Entry to China 02 PD China Mobile Teles Service Industry 2 KEY MESSAGES 1. China’s mobile tele service market is huge and fast growing, representing US$21 billion market size in 2022 and US$38 billion in 2022. This market is supported by the world’s largest subscriber base at 145 million, already prising 15% of the world’s total in 2022 and growing to potentially 218 million in a low case or 300 million in a high case by 2022 2. The petitive landscape for mobile services has evolved from a single regulator and operator to today’s duopoly of China Uni and China Mobile, both of whom are unassociated with the Ministry of Information Industries. A second breakup of China Tele is expected to form two large tele operators, China Tele and China Net Group, who are likely to receive mobile licenses. A fifth tele operator, China Rail, also has the potential of receiving a third generation license and building a mobile business. For now, China Mobile dominates the market with 82% value share and 72% subscriber share and owns much of the high value user base. However churn is already high and is expected to increase with continuing pricing pressures and increased petition. 3. Wireless data services are expected to grow quickly in China to a market of potentially over US$4 billion by 2022, used by 43% of all mobile users. Interest from consumer surveys have been high and operators and other players are actively building services in the market. While early WAP services have failed to catch on, SMS has grown exponentially with up to 20 billion SMS messages in 2022. The early adopters will be mobile professionals and modern youth, who will require services and devices tailored to their needs. 4. Regulatory changes loom, particularly with the accession of China to the WTO. While foreigners will be unlikely to set up MVNOs, WTO will allow greater participation of foreigners in basic and value added services, although geographic limitations will exist through 2022 and Chinese players will be required to own at least 50% of tele service ventures (51% for basic services). Regulatory risks remain, with no means to appeal regulator decisions, unclear interpretation of regulation including WTO mitments, and the government’s track record of intransparent and unpredictable decision making. (See separate regulatory PD for details) Appendix – Players profiles – 3G technology standards choices 02 PD China Mobile Teles Service Industry 3 KEY MESSAGES 1. China’s mobile tele service market is huge and fast growing, representing US$21 billion market size in 2022 and US$38 billion in 2022. This market is supported by the world’s largest subscriber base at 145 million, already prising 15% of the world’s total in 2022 and growing to potentially 218 million in a low case or 300 million in a high case by 2022 02 PD China Mobile Teles Service Industry 4 7 . 68 . 41 1 . 81 6 . 22 1 . 12 7 . 93 2 . 03 4 . 53 8 . 41997 1998 1999 2022 2022 2022 2022 2022 202219972022 MOBILE SERVICE REVENUE GROWTH OF 30% CAGR HAS OUTPACED OTHER TELECOM SERVICE SECTORS AND IS PROJECTED AT 16% THROUGH 2022 Revenues US$ Billions CAGR vs. other industries (19972022) Percent 21 4 . 330Mobile Fixed line Paging CAGR 30% CAGR 16% Source: Deutsche Bank。 McKinsey analysis 02 PD China Mobile Teles Service Industry 5 15517619721813 254385145 * Revenues do not equal the product of ARPU as subscriber figures are provided for year end, not average subscribers during a year. Detailed information on the timing of new subscriptions and churn required for the calculation of average subscribers during a given year is not available ** All CAGRs are calculated on the announced data Source:Deutsche Bank。 JP Man。 MII EXTRAORDINARY SUBSCRIBER GROWTH IS THE PRIMARY DRIVER OF REVENUE EVOLUTION, MORE THAN MAKING UP FOR LARGE DECLINES IN ARPU DUE TO STIFF COMPETITION 13 12 12 1215212936497 . 6 8 . 41 1 . 81 6 . 22 1 . 12 7 . 93 2 . 03 4 . 53 8 . 497 98 99 00 01 02E 03E 04E 05EMobile revenues* $ Billions Number of subscribers – low case Millions CAGR 30% CAGR 16% CAGR 83% ARPU US$/month CAGR 24% CAGR 7% ? Peration initially low ? Government backing for increasing subscriber numbers ? Relatively low fixed line peration ? Lowend prepaid subscriber increase Drivers ? Decline due to increased prepaid and lower spending by late entrants ? Tariff reduction as petition increases ? Slightly offset by increase in data traffic in later years CAGR 19% 208 235 263 291 17 16 15 15 Announced Effective 02 PD China Mobile Teles Service Industry