Fashion, technology drive mobile market

The mainland's mobile phone industry is unlikely to face the kind of cut-throat price war seen in the electrical home-appliance and television-set markets, according to TCL Mobile Communications.

'Mobile-phone purchase was not simply done for necessity but also for entertainment and fashion... the product's replacement rate will be higher than that of the electrical home-appliances,' vice-president Liu Fei said.

Mr Liu said the product's high differentiation and being a fashion feature could help it fare better.

TCL Mobile is indirectly controlled by TCL Holdings, which is majority-owned by the municipal government of Huizhou city. TV-set maker TCL International Holdings, a Hong Kong-listed vehicle of TCL Holdings, also owns 20 per cent of the unit.

Mr Liu said the positive business outlook would be helped by the high growth potential in the industry.

Mr Liu said his company saw prices of mobile handsets launched last year fall by 25 per cent this year but new models were still selling at a 'healthy' price level because of stronger demand.

He said the price fall would be partially offset by the mainland's increasing demand for mobile handsets.

The market growth would be mainly driven by the low penetration rate and technological innovations that enable increasingly advanced value-added services, he said.

The penetration rate of China's cellular phone market was 9.2 per cent as of August 31, compared with the average penetration rate of 40 to 50 per cent in Europe and the United States.

Mr Liu projected that the number of mobile phone users this year would be 60 to 70 per cent higher than that seen last year but growth would slow in the following years.

However, the annual new demand in absolute terms would still be great, with sales of 50 million to 60 million units a year over the next two years.

Possible moves by domestic telecommunications carriers' to raise the declining average revenue per user (arpu) by introducing more sophisticated value-added services would also help the mobile phone market.

The country's arpu mainly comes from the basic sound transmission service, as its value-added services are still rudimentary.

Mr Liu said he believed the country's mobile phone business would experience high growth for at least another three to five years because it was still 'young' in the country.

'If you liken the business to a man, the mobile phone industry is still in his 20s . . . while the home-appliance sector is already in its 40s, facing a middle-age crisis,' said Mr Liu.