Analysis of China's Telecommunications Industry

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Contents
Introduction2
An overview of China’s telecommunications industry at current3
Competitiveness and Market Share5
China’s telecommunication industry analysis6
An internal analysis of China’s telecommunications industry6
Barriers to entry6
Industry Rivalry7
Bargaining power of buyers8
Bargaining Power of Suppliers8
Threat of substitute products/services8
An external analysis of China’s telecommunications industry9
Political/Legal9
Economic10
Socio-Cultural10
Technological11
Environmental11
Conclusion12
Appendices14
Appendix A: GDP growth rate14
Appendix B: Excerpt from the Telecommunications Regulations of the People’s Republic of China:15
Appendix C: Market share of the telecommunications industry16
Appendix D: HHI calculations18
Appendix E: Ageing Population from 2000 - 205019
References20

Introduction
China’s telecommunications industry is currently experiencing significantly large growths with revenue increases up 12.8% year-on-year to 386.2 billion yuan (MII, 2011). A large contributing factor to this increase is China’s enormous population of 1.3 billion (Mewton-Smith, R 2011) and as a cause has gained position as world leader with respect to subscribers. China’s telecommunications industry has always played and still proves to be a driving force in the country’s economy. Recent reforms in 2008 have seen the emergence of three dominant telecommunication operators China Mobile, China Telecom and China Unicom in an attempt to boost the telecom industry.

China’s economic growth will continue to raise its competitiveness in the global environment with Competitive Global Index (Global Competitiveness Index 2010-2011) of 4.84 positioning China at 27 in world rankings. Forbes (2008) announced China as the world’s leader in mobile telecommunications yet China has lagged on internet related services and are therefore unable to compete in these services worldwide. Contrary to the above, the issuance of 3G licenses to telecom operators will see the increase in foreign direct investment that China was hoping to achieve in the near future.

More notably, the accession to the World Trade Organisation (WTO) will work mostly in favour of China with invaluable benefits directed to its economy. As previously noted, the entrance to the WTO will further promote FDI and will generally increase China’s rank as a global competitor.

An overview of China’s telecommunications industry at current At present, China’s telecommunications industry is dominated by three state-run telecom carriers: China Telecom (CDMA and CDMA2000), China Mobile (GSM and TD-SCDMA) and China Unicom (GSM and WCDMA). China’s government still retains majority ownership of all three firms.

In the past decade, China’s telecommunications industry has shifted from a monopolistic structure to an oligopolistic structure as made evident through characteristics described in the subsequent text.

As listed above, the industry is dominated by three firms: China Mobile, China Telecom, China Unicom. China’s accession to the WTO in December 2001, opens up their market for further international trade and investment (Chow, 2001). This will consequently increase the number of players in the industry as new entrants, namely foreign investors, gradually become apparent. Services of the telecommunications industry are relatively homogenous which means that existing competitors are restricted in terms of revenue gains if they do not diversify into new market opportunities.

The oligopolistic structure of the industry enables us to conclude that barriers to entry are particularly high. The barriers faced by potential entrants are predominantly political and financial constraints. The high regulation of the industry is one of the dominating factors in the hindrance of new entrants. China’s government has majority-ownership of all three operators and maintain control over all of them. Regulations...
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