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 Tuesday, July 26, 2011

China will hit the 1 billion mobile connections milestone in May 2012, according to the latest Wireless Intelligence forecasts. China is already the world's largest mobile market, surpassing 900 million connections last quarter, which means the country is forecast to add a further 100 million subscribers over the next 12 months, surpassing 1 billion during Q2 2012.

By the time the 1 billion milestone is reached we estimate that Chinese mobile penetration will stand at 74 percent, up from 67 percent in Q2 2011, suggesting that the market will still have plenty of room for future growth.

We expect the market shares of the three Chinese mobile operators to remain largely unchanged from today. Market-leader China Mobile will see its share slip slightly from 68 percent to 66 percent, while third-placed China Telecom will increase two percentage points to 14 percent. China Unicom - the second-largest player - will see its market share unchanged at 20 percent, according to our estimates.

The number of Chinese subscribers connected to 3G networks is expected to account for a quarter of the country's total at the 1 billion point, up from 18 percent in Q2 2011. All three operators are rolling-out different versions of 3G technology: TD-SCDMA at China Mobile; WCDMA at Unicom; and CDMA EV-DO Rev. A at China Telecom (both China Telecom's CDMA2000 1X and CDMA EV-DO Rev. A networks are classed as 3G). China's Ministry of Industry and Information Technology (MIIT) reported that 714,000 3G towers have been built in the past year - 214,000 for China Mobile, 274,000 for Unicom and 226,000 for China Telecom.

The relatively slow migration to higher-speed networks in China to date reflects the fact that smartphone penetration is still low - but rising fast. Smartphones are thought to account for around 10 percent of China's total base, but the exact figure is hard to calculate due to the large number of 'grey market' smart devices in the market. China Mobile, for example, says it already has 5.6 million iPhone users on its network, even though the devices can only currently access the operator's 2G (GSM) network and the device is not retailed by the operator.

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