China's wireless value-added services market has room to grow, says Ovum

March 11, 2007

According to Ovum, the analyst and consulting company, the 437 million mobile phone users in China undeniably make it the world's most promising market for wireless value-added services (WVAS), and the market will grow at a very dynamic and robust pace in the years ahead. With data contributing 21% of total mobile service revenues by June 2006, Ovum forecasts that WVAS will generate over US$11.5 billion revenues in China by 2010, a 48% surge from 2006.

Kevin Lee, a Senior Analyst with Ovum based in Hong Kong, explains: "Messaging will continue to dominate the WVAS sector, contributing to over 63% of total VAS revenues in 2010." According to Lee, the advent of new media services including mobile music, games and mobile TV, primarily assisted by the high consumption of bandwidth will change the current market scenario (in which messaging, personalisation and alerts services account for majority of the mobile VAS revenues). Lee explains, "The growth of the wireless value-added services market in China will likely be driven by the latest change of VAS policy, availability of converged terminals, strong economic growth, rising customer awareness and demand, and increasing foreign investment." The launch of 3G and also possible WiMAX deployment may also give a boost.

SMS, ringback tones and WAP are the fastest-growing services and will continue to be the predominant services in the next few years. To meet rising user demand, mobile operators are moving towards producing increased service diversity and personalisation to cater for different customer needs.

In the upcoming 3G era, Ovum envisages that multimedia content such as mobile TV and mobile music will become mainstream. Other than these, new applications such as location-based services, mobile blogging and mobile payment will have an appealing growth potential considering the huge landmass and the high mobility of the Chinese population in the country. Ovum believes that push email services will also gain traction in the enterprise market as corporations become more technology-savvy.

By turning into information service providers, mobile operators have exerted increasing control on the VAS providers. "The introduction of new policy from the Ministry of Information Industry (MII) also gives an upper hand to the carriers in the changing WVAS ecosystem," adds Lee. All these will lead to continued consolidation of the WVAS market and stronger co-operation among players in the value chain. "In the long run, Ovum believes this will result in a more healthy and favourable environment for the continued market growth."

Operator China Mobile has a much wider WVAS offering and a stronger take-up rate due to its earlier entry into the VAS market. The latecomer China Unicom is trying to catch up and has been very aggressive in building its CDMA 1X services. Only China Unicom has a dual network of GSM and CDMA, so launch of dual-mode handsets can also drive the adoption of VAS for cross-network users.

Nevertheless, there remain uncertainties in the VAS industry. "The most imminent issue is the conflict between the telecoms and broadcast regulators on mobile TV services, where SARFT requires mobile TV services to obtain broadcast licences but did not approve any licences for mobile telcos. The late recommendation of the domestic transmission standard has also complicated the market situation when mobile operators have already launched trials using other international standards," concludes Lee.