Communications & Networks

In 1H 2008, China's telecom industry solutions market reached 9.92 billion Yuan, up 8.3% YOY. CCID Consulting projects revenues will break through 20 billion Yuan by the end of 2008, up 7.1% YOY. CCID Consulting defines "telecom industry solutions" as telecom operators, equipment vendors, and systems integrators that provide telecom solutions and services.

source: ccid consulting, July 2008

Government and financial services sectors had the largest demand.

China's government sector in 1H08 was the largest with a spend share of 19.6%. Several factors drive spending. First, the government is transforming itself into a service-oriented one, which will drive increased ICT (information and communications technology) investments. Second, there is a focus on more rural governments in China's Tier 3 and 4 cities, which will offer more potential than the urban Tier 1 and 2 cities. Finally, China's overall tax revenues in 2007 was nearly 5 trillion Yuan, up 30% over 2006, which provides a solid base for increased ICT investment.

The second largest sector is financial services, at a spend share of 18.3%. The focus on telecom industry solutions spend will be on further expansion and refinement of existing financial services, such as online banking and mobile phone securities monitoring and trading.

Government and financial services tend to lead China's overall telecom industry solutions adoption and spend. As such solutions become more mature, other industries follow. Education, logistics, electric power, coal, and petroleum round out the top seven in terms of telecom industry solutions spend in 1H08.

Telecom industry solutions expand to SMEs.

In 1H08, the two major categories of telecom industry solutions are call centers and video conferencing. These categories are expanding into China's SMEs (small and medium enterprises).

Large scale call center solutions, such as those for telecom and banking, are nearing completion. Future demand for such call centers will be in the form of systems upgrades, increasing capacity, and systems transformation. As call center solutions for securities, insurance, computer, consumer appliance, manufacturing, tourism, logistics, retail, and e-commerce near completion, CCID Consulting expects the next wave of demand to come from SMEs. In the next five years, for example, CCID Consulting forecasts SME call center CTI equipment spend to have a growth rate of 23%.

For video conferencing, China's enterprises, large and small, are realizing the benefits of real-time communications and resulting efficiencies. China's 11 million SMEs are becoming new hotspot for video conferencing. However, unlike government and large enterprise applications which are sophisticated with technician support, SMEs video conferencing require leverage of existing, and more limited, IT and communications resources. Small scale video conferencing and service-oriented models will be the mode for SMEs.

China's recent telecom restructuring will bring unprecedented opportunities.

The telecom restructuring will enable more growth for telecom industry solutions. One of the goals of the restructuring is to foster China's 3G development and arrival. 3G offers larger capacities and better communications quality than 2G and 2.5G. The 3G vision is to enable users to realize seamless voice, data, and multimedia. For businesses, users will realize the fully mobile office, with mobile positioning and long distance access and control.

The competition of the three, more resource rich telecom operators will spur better telecom industry solutions. For example, newly restructured China Telecom has existing strengths in the commercial sector, but it would like to compete for the individual user, it must provide better services and infrastructure, thereby driving higher levels of telecom industry solutions.

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Ó 2008 CCID Consulting Co., Ltd.