Abstract

China Mobile has experienced impressive revenue growth from its value-added services. By the end of 2005, these services accounted for more than 20% of total revenue, making them China Mobile's second largest source of revenue after voice service. As of late 2005, 206.7 million China Mobile subscribers - 83.8% of the total - were using mobile data services. The rate of growth in revenue from value-added data services has been faster than that from value-added voice services; by the end of 2005 value-added data services accounted for 74% of total revenue from value-added services.

Ever since its launch, China Mobile's SMS service has consistently held the largest share of revenue from value-added services. The main reasons for the success of SMS service are that it is practical, easy to use and cheap. Given the constant growth in China Mobile's already huge subscriber base, it can be anticipated that SMS usage will remain high for some time to come, and that it will continue to account for the highest share of value-added service revenue. Music services and WAP are the second most important types of value-added service. Both of these services help to enrich the mobile content available to mobile phone subscribers; however, in both cases growth can be affected by changes in subscriber behavior. In the case of music service, if the music content that is available from the service becomes stale or if subscribes lose interest, subscribers of that service will start to decline. As of the end of 2005, WAP service accounted for only 7.1% of China Mobile's total revenue from value-added service, while CRBT - the most successful of the company's music services - accounted for just 6.8%. China Mobile currently offers two different types of mobile e-mail service - the BlackBerry technology developed by RIM, and China Mobile's own mobile e-mail service. Both services can be used to send and receive e-mails and attachments, and both provide a high level of security; they thus appear very attractive to corporate customers. However, the growth of these services has been affected by lack of awareness among business users and by the high charge rates; the fact that BlackBerry terminals are not yet available in China have also affected take-up. Mobile advertising and mobile payments are both relatively new types of value-added service. Growth in these areas will be strongly affected by consumer behavior, the establishment of industry standards, and business models; it seems unlikely that significant revenue growth will be seen in either service in the near future.

While developing new types of value-added service, China Mobile has also been working to strengthen its control over the supply chain. While continuing to collaborate with third-party service providers, China Mobile has begun to play the role of service provider itself in some business areas. For example, China Mobile has introduced its own instant messaging software and ceased to collaborate with instant messaging service providers. China Mobile has also launched its own mobile music service, and has supplemented BlackBerry with its own mobile e-mail service. No longer content to serve as merely a platform provider, China Mobile is aiming to maximize revenue growth from new value-added services and from the steady growth in its subscriber base. The transformation in China Mobile's role will be accompanied by increased vertical integration. Rather than being just a platform provider, China Mobile will combine the roles of platform provider, integrator, and service provider. Smaller, weaker service providers will find it increasingly difficult to stay in business, while larger service providers and those capable of offering unique services will become either competitors or cooperators with China Mobile. In any event, China Mobile's huge subscriber base will enable the company to maintain a dominant position within the value-added service supply chain.

Appendix

List of Companies