|Issue:||Asia-Pacific I 2005|
|Topic:||New technology, new users, new possibilities in China|
|Title:||Executive Director and Chief Executive Officer|
|Organisation:||China Resources Peoples Telephone Company Limited|
Charles Henshaw is the Executive Director and Chief Executive Officer of China Resources Peoples Telephone Co. Ltd. Mr Henshaw joined China Resources Peoples Telephone Co. Ltd. as Chief Technology Officer in September 1998. Mr Henshaw was responsible for the strategy and implementation of new technologies within the Company, focusing on enhancements of mobile services into messaging, transaction and multimedia services. Previously, Mr Henshaw worked with Ericsson in a variety of telecommunications management capacities in different countries. He was the General Manager of the Fixed and Cellular Networks of Ericsson in Hong Kong before leaving for China Resources Peoples Telephone Co. Ltd. Mr Henshaw also sat on the committee of the Hong Kong Telecommunications Association from 1997 to 1998 and advised on issues within the HK mobile telephone market.
China, the world’s largest cellular area still has low market penetration. Hong Kong has one of the world’s highest penetration rates. In both, voice drives mobile usage, but data services are proliferating. In China, the Internet is not yet widely used; mobile handsets substitute PCs for e-mail and text; SMS bridges between wireless and wired Internet. Mobile growth in Hong Kong depends upon applications and content availability. Growth in mobile data is limited while China awaits governmental regulation of 3G.
High-speed wireless data, a foundation for growth We are becoming accustomed to seeing the global subscription numbers for mobile data services soar as new applications drive traffic upwards. High-speed networks based on advanced technologies such as EDGE, UMTS, CDMA 1X and WCDMA will grow steadily during the next few years. Although voice continues to drive mobile network usage, data services are proliferating rapidly. The outlook for data services stimulates the mobile carriers with its promise of future growth. IT convergence will play an important role in the development of data technologies and markets. Standardisation of IP-enabled voice, data and video on next generation networks will bring a wide range of innovative multimedia services and generate new revenue streams for the mobile carriers. The future looks good for mobile carriers that embrace the new database technologies. However, to realise the market’s potential, service providers need to work closely with handset vendors and content developers, to create appealing products and services that meet customers’ needs. Technology has to be converted into innovative, compelling, content and applications. User experience determines success Insight into prices that customers are willing to pay for data services, the use that will be made of them, the driving applications and the types of devices users want, is essential so that mobile carriers, content and application developers and handset makers can guide themselves. Though a wide variety of intelligent devices with large colour displays can be expected, it is not so much technology as price, usefulness and usability that will determine the shape of the market to come. Users are willing to pay for new data services, but only at fairly low—affordable—prices. Users are open to new technologies, and can absorb new features so attractive prices and suitable customer education should result in rapid adoption. In view of the intense competition, customers’ satisfactions with service quality and customer care are crucial to building market share. Users tend to be uncompromising with regard to service quality—to signal reception, voice quality, dropped calls, customer care, technical support, user guidance and billing issues. Wireless data in China All of this is true in China, the largest cellular market in the world. China had 320 million subscribers at the end of October 2004 and an average of 5.5 million new users signing up each month. China, with its enormous population, continues to lead the world in overall subscriber growth and has the highest potential for future growth in the world. Over the last decade, the China mobile market has gradually migrated into the digital era. SMS-based applications dominate growth—9.8 billion short messages (SMS) were sent during the Chinese New Year, in January 2004, alone. At RMB 0.1 per SMS (approximately 850 Renminbi = US$ 1.00), RMB980 million in revenue per year has been generated over eight years. According to market researchers, e-mail is the most used mobile data service. Subscribers tend to use their handsets, as a substitute for the PC, to send and receive e-mail and text messages. In this way, the simple yet useful SMS acts as a bridge between the wireless Internet and the wireline Internet. Wireless subscriber growth is experiencing robust expansion in China. The availability of high-speed data networks such as CDMA2000, WCDMA, EDGE and the development of the homegrown TD-SCDMA, will give operators improved network efficiency, higher capacity and the ability to offer high-speed data services. Some analysts estimated that wireless data services in China will swell to US$5.68 billion and the number of users will reach 112.5 million by the end of 2005. The wireless system plays a significant role in China where the Internet has not been widely popular. It also provides open system content providers with an effective, attractive, business model. Availability of large amounts of content makes data communications attractive to subscribers and in return, subscriber demand stimulates content providers to develop and supply a wider variety of content. This cycle generates positive prospects for China’s data market growth. The growth of China’s mobile data market, though, will also depend upon the widespread availability of suitable equipment at affordable prices. The implementation of EDGE technology can be expected to play a significant role in the migration of users from voice-only communications to a more complex mixture of voice, wireless data, and multimedia services. Operators in China hope that positive user experience with the current 2.5G (generation 2.5) services will translate into the rapid adoption of 2.75G and later 3G services. However, 3G’s situation in China remains unclear, since the government has not yet decided what type licences to issue, how many to issue– and when. The relatively conservative Chinese wireless operators would prefer to pace infrastructure rollout to accompany the resolution of regulatory requirements and technical issues and as well, the availability of attractive, affordable, handsets and relevant content. Since many 3G features are not yet in demand, it is likely to take several years before 3G reaches high growth levels. Hong Kong and China–the indispensable relationship Hong Kong, the natural gateway to mainland China for more than a century and the Asia’s telecom hub, has a vibrant mobile market. Although Hong Kong’s economy is small, six operators, with twelve mobile networks, provide nearly ubiquitous coverage within the territory. The penetration rates are very high so there is a large base of tech-savvy customers prepared for new technologies. However, the high penetration also signals limited room for development in voice service. The growth potential of data services therefore gives operators a way forward to grow revenues. Although Hong Kong’s wireless data usage is still only at an early stage of growth, 2.5G users grew from 730,000 at the start of 2004 to over 1.2 million by the end of September 2004. This was driven by the increasing use of wireless both by corporate and individual users. The wide variety of devices, improved device functionality and variety and customer education all played key roles in the wider acceptance of 2.5 G by users. Hong Kong’s customers, although very price conscious, are receptive to innovations in design and content. They are also knowledgeable and demand high quality service. They will not use a service twice that does not meet their expectations. Furthermore, they tend to invest in new services only when they see a tangible benefit, so making things in Hong Kong work technically and commercially has always been a challenge for equipment vendors and operators alike. Content and applications are important for the growth of mobile data in Hong Kong. Only by delivering innovations that cater to the user’s interest and needs have service providers, handset vendors and content suppliers been able to make Hong Kong a world leader in telecom and mobile communications. One sees everywhere a host of sophisticated handset functions for videos, games, push emails and many more, all working smoothly on the city’s high-speed wireless networks. Hong Kong’s government plays an important role in the exploitation of mobile technologies by maintaining a favourable environment for continuous investment and fair competition. The government’s technology-neutral and open access policies help promote the development of mobile networks by third-party content and application providers all over the world. Hong Kong is well positioned to customise content and services for local Chinese and other Asian market conditions and requirements. Customisation of content commonly involves not only basic design, but also language, metrics and local cultural flavors as well. Its world-class telecom infrastructure attracts overseas companies to establish their regional offices and headquarters in Hong Kong where they can also more easily capitalise upon the business potential of the emerging China market. China’s WTO commitments have tended to open its mobile and Internet platform content, applications and service markets to foreign investment. Hong Kong, equipped with the necessary infrastructure, serves as a springboard, which overseas companies can exploit to penetrate the world’s largest and fastest growing telecom market. For the territory itself, the CEPA (Closer Economic Partnership Arrangement) facilitates closer cooperation with its mainland China counterparts and provides easier access for local operators to capitalise upon China’s immense telecoms VAS (value-added service) sector. Opportunities and challenges ahead Data services will provide operators with the opportunity to diversify their revenue streams. In Hong Kong, with its over-saturated market penetration and the leveling off of voice revenue, operators count upon data, video and multimedia applications to sufficiently increase their ARPU (Average Revenue Per Customer) to justify investments in high-speed infrastructure. Network and application developers are tackling interoperability issues for both infrastructure and terminal equipment, building a community of users for their products, minimising development time and time-to-market and making sure their applications work within the available bandwidth. Dealing with the processing constraints of wireless devices and networks are among their top priorities. Applications will have to be tailored to meet the requirements of each individual market banks and financial institutions, for example, require standards and services that meet the specific needs of their regulated and demanding user community. The relationship between China and Hong Kong is becoming more intimate as a result of the WTO and CEPA agreements; the closer ties between them promises many mutual benefits including, importantly, for their respective telecom sectors.