Internet & E-Commerce

In Japan and South Korea, over one-third of their Internet users are mobile Internet users. China's highly mobile and Internet user habits are much more likely to mirror Japan and South Korea, rather than America and Europe.

According to CCID Consulting, as of 2007 China had over 547 million mobile phone subscribers and over 180 million Internet users. CCID Consulting believes this is only just the beginning of this incredible potential.

Not surprisingly, there is talk of China Mobile (SEHK: 0941, NYSE: CHL) planning to set up an independent affiliate that will run the Company's Internet services, including the newly launched IM service Fetion, wireless advertisement and 139Mail.

China Mobile is China's largest mobile phone operator in China. If ranked by number of subscribers, numbering at over 380 million, China mobile would be the world's largest mobile phone operator.

Currently in China, there are mobile phone operators, like China Mobile, and what is known as service providers (SP), like Tencent. SPs partner with operators to provide value-added offerings such as IM and ring-tone downloads to customers under a revenue-sharing agreement.

China Mobile will have taken a huge stride to unlocking China's mobile Internet opportunity. At the same time, China Mobile will also cause a shake-up in China's existing mobile phone value chain.

• China Mobile will be taking a step towards competing more, and cooperating less, with existing SPs;
• New partnerships will arise with Internet content providers and search engines, such as Shanda (NASDAQ: SNDA) and Sina (NASDAQ: SINA). They will offer services the mobile phone operators simply cannot. At the same time, these providers will extend their reach enormously.
• Larger players will dominate. SP like Tencent (HKSE: 0700.HK) will remain competitive with both its scale and move towards the Internet. Smaller SPs will be at risk.
• Other mobile phone operators will follow.

As with unlocking any opportunity as large as China's mobile Internet, some players will thrive and grow, while others will go by the wayside.

For more information

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Unless otherwise specified, all information provided is sourced from CCID Consulting.

Ó 2008 CCID Consulting Co., Ltd.