CEO Insights

Our view of Chinese consumers and what they need in order to make their mobile phone services more valuable.

China: Leapfrogging into Mobile
China's Wireless Generation Looking to Korea and Japan
Mobile Phones as a Fashionable Part of Life

We do not drive consumer tastes, but we believe that we understand them very well despite the rapid development of the industry. Here are some of our insights ...

China: Leapfrogging into Mobile

Until two decades ago, the movement of Chinese people around the country was restricted by government regulation, and the vast majority of China's urban population lived either at, or within a short walking/cycling distance of, their work units.

With life centered around the local work unit, most people did not need to own a telephone, let alone a mobile phone.

Over the past 20 years, however, as the government has reduced travel restrictions and opened up the economy, China has become a more mobile society. Beginning in the 1980s, demand for telecommunications infrastructure soared as the economy developed and people began to travel and move to new cities in pursuit of work opportunities outside of their home towns.

In this more open environment, the telephone has become indispensable for business and for helping individuals to bridge long distances to maintain traditionally strong family relationships.

China's comparatively late drive to build out a fixed-line telephone network was short-circuited by the mobile revolution that began in the mid-1990s, as Chinese users began to opt for a mobile phone sometimes before even installing a fixed-line.

In less than a decade, China's mobile user base has topped 300 million with 5 million new users coming onto the networks each month.

Typically, Chinese mobile users do not carry both a mobile handset and a personal digital assistant such as a PalmPilot. Instead, they expect their phones to take on more of these functions. In the West, people migrated from calendars to day-timers to PIMs to PDAs to smart phones.

In China, many people are going directly from the desk calendar to the smart phone.

China's Wireless Generation Looking to Korea and Japan

Wireless value-added services contributed approximately 8% to the revenues of mobile operators in China in 2003. In Korea it is 20%. In Japan, it is 25%.

The potential for growth is limited only by our ability to address the needs of users in an increasingly targeted fashion.

Korea, Japan and China share similar lifestyles, consumer behaviour patterns and cultural similarities such as language. Trends in fashion, consumer items and music in Korea and Japan will often emerge soon afterwards among China's younger consumers. This is important.

While 15-20 years ago the reference culture was the U.S., today it is neighboring East Asian countries. The reason is simple – relevance.

This trend leadership has its roots in the strong presence of Japanese cartoons and Korean television programs in the entertainment habits of young Chinese people. Industry analysts anticipate that this relationship will continue and mobile data services will follow the same pattern – a link made stronger by the fact that Japan and Korea, like China, have dominant but intensely competitive mobile operators which provide a service platform, allowing third parties to provide wireless value-added services to mobile phone users.

In addition, Chinese urbanites, like their Korean and Japanese counterparts, are commuting more, be it by public transport or private car. Mobile phones are perfect for offsetting commuting time.

Mobile Phones as a Fashionable Part of Life

The target consumer group for WAP services has literally 'grown up' alongside the development of the mobile telecommunications industry in China. Chinese aged 15-34 are literally the 'mobile telephone generation.' This target WAP consumer group is very fashion-conscious. Early adoption of new technologies and associated services are an important part of being fashionable and strongly influence their purchasing decisions.

But we have found that what makes a service cool is not how it looks, but what it does. If it genuinely serves a need or a desire and it does so elegantly, that's cool.

Mobile phone handsets and mobile data services are fashion items for young Chinese consumers. Ring tones and picture downloads are an expression of individualism and personality, making the phone an extension of ourselves, not only physically, but emotionally as well. Chat rooms are an increasingly popular way of keeping in touch with friends, family, and colleagues.

WAP services provide access to web email, calendars and address books, bringing a highly desirable level of mobility and a comforting sense of control into the lives of China's upwardly mobile young people.

For this group of consumers, mobile phones are a part of life. While young people in other developed countries have cars and a myriad of entertainment options, we believe that content and applications through mobile phones will become vital entertainment choices for China's urban and rural youth.

Given the vast range of geographical and social/economic situations found in China, there is no 'average Chinese consumer'.

Consumer preferences are fragmented along provincial lines according to different tastes, ages, preferences, levels of income, etc. This means that there is no one "killer app" for mobile value-added services, and indeed there is probably no "killer bundle." Variety, choice, and a focus on serving the customer, rather than a pure "content pump," is what will ensure success in such a heterogeneous market.

Our challenge is to continue to find ways to enhance their quality of life through the capabilities that wireless communications give us.