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China Mobile Communications SWOT & PESTLE Analysis

Last Updated : 29 Jun, 2017

OVERVIEW

Name of the Company: China Mobile Communications Corporation

Business Sector: Telecommunications

Operating Geography: China, Hong Kong, Pakistan

About the Company: Formerly known as China Telecom Mobile Communication Bureau, China Mobile Communications Corporation was founded in 1997 and is based in Beijing, China. It is a telecommunication company providing mobile voice and multimedia services. As of May 2016, it is the world’s largest mobile phone operator by subscribers (835 Million).

Revenue: Rmb 708.4 bn ($102.8 bn) (FY ending 31st December, 2016)

SWOT & PESTLE Analysis

The SWOT analysis for China Mobile Communications is presented below:
Strengths
Weaknesses
1. First mover in the 4G services
2. 64% of market share in 4G services
3. World’s largest VoLTE network
4. Unflagging pursuit of customer service excellence
1. Limited geographical presence
2. Steady decline in net profit
3. Incompetence in decision making
Opportunities
Threats
1. Expansion into rural markets in China
2. International expansion
1. Introduction of foreign players
2. High number of low-value customers
3. Withdrawal of Chinese government from China Mobile
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Strengths

1. First mover in the 4G services: The Chinese government granted three time division, TD-LTE, licenses to China Mobile (CM), China Telecom (CT) and China Unicom (CU) in December 2013. CM launched its 4G services officially in 2014. On the other hand, CT and CU discovered that their 3G technologies (CDMA2000 and WCDMA respectively) were not compatible with TD-LTE. Therefore they decided to hold back on their 4G launch and wait for FDD-LTE (Frequency division duplex long term evolution) licenses instead. The government was keen to promote TD-LTE and saw it as a self-developed technology. The FDD-LTE licenses were granted only in February 2015, i.e. almost after 14 months of granting TD-LTE. This resulted in CM having more than one year’s lead time in 4G.

2. 64% of market share in 4G services: The 4G penetration rate of its mobile customers have reached 63% and its net market share for additional 4G customers has exceeded 64% as of 2016.

3. World’s largest VoLTE network: The CM group has built the world’s largest VoLTE, which provides highest quality VoLTE for commercial use in 313 countries. The CM group took measures to bolster the growth of terminal industry which is the driving factor towards the development of VoLTE. At the end of 2016, there were 1090 4G terminal models in stock out of which 927 models supported VoLTE.

4. Unflagging pursuit of customer service excellence: The CM group pursues unwavering devotion towards providing exceptional customer services and drawing a relentless focus on its valued customers. The group continuously strives towards upgrading its service quality management and creates a transparent and secured communication platform. The full centralisation of its 10086 customer service hotline operation initiated by the China Mobile group in 2016 has played an important role in improving the service efficiency and further improving the overall hotline connection rate. 1.96 million call numbers which were nuisance numbers and more than 100 million fraudulent calls were blacklisted from overseas, which curbed new types of unlawful behaviours and crimes taking place in the telecommunication industry.

Weaknesses

1. Limited geographical presence: The Company has a limited geographical presence and it operates in three areas namely, Mainland China, Hong Kong and Pakistan. In order to sustain long term growth, they need to diversify their portfolio.

2. Steady decline in net profit: Since it is a state run company, the company has a heavy social responsibility. There are more than 400 thousand employees working in the company. It also has a duty towards building communication networks as well as investing in basic network facilities which increases its operational cost. Due to this, in spite of increasing revenues, the company shows decline in net profit.

3. Incompetence in decision making: Since the company is a state-owned enterprise, the complex organizational structure leads to a very slow market reaction thereby increasing the cost of innovation.

Opportunities

1. Expansion into rural markets in China: Having a huge market in China and the pace at which China is growing, the company can expect a huge jump in its subscriber base. There is a chance however, that the overheated domestic market might compel the company to look outwards into international markets for its expansion. Also, rural markets of China are not completely developed which shows a huge potential for the company.

2. International expansion: The company has a huge opportunity to tap emerging markets like India where already there is a telecom war going on. In order to increase their global presence they can spread their reach by Mergers & Acquisitions with the local or regional players.

Threats

1. Introduction of foreign players: The Chinese telecom sector has heavy regulations and is currently screened off from international competition. Recently the Chinese government has been contemplating opening up the sector to foreign players. As the industry becomes more open, China Mobile will need to also concentrate not only upon the competitive potential of local firms but also that of international players.

2. High number of low-value customers: In order to gain a competitive advantage over its rivals, China Mobile has added huge number of subscribers mostly in the low-price, low-value segment. This shows that it is a volumes player rather than a premium player. With recent advancement in technological breakthroughs like 4G, China Mobile faces a threat to its business model and in turn will have to offer high value added services to stay in the competition.

3. Withdrawal of Chinese government from China Mobile: China Mobile enjoys a strong relationship with the Chinese government partly because of the fact that it is a SOE which might change in the future. With the opening up of the Chinese economy, the government would most likely be assessing the trade-off between the economic payoffs and social dividends.

To get the complete detailed SWOT report on China Mobile Communications please mail us at: support@swotandpestle.com. or contact us here.

China Mobile Communications SWOT analysis has been conducted by Devang Vinchhi and reviewed by senior analysts from Barakaat Consulting.

References

1. China Mobile Communications Corporation Annual report 2016- http://www.chinamobileltd.com/en/ir/reports/ar2016.pdf  

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The PESTLE analysis for China Mobile Communications is presented below:
Political
Economical
1. Regulatory and policy changes.1. Significant GDP growth rate
2. High bargaining power of the customers along with low switching over cost
Social
Technological
1. High literacy rate
2. Strengthening connectivity and value co-creation
3. Innovative social development towards improvement in people’s livelihood
1. Proactively tapping the household market by expanding range of home broadband products
2. Surpassed the industrial benchmark in NFC and e-wallet business
3. Launched an IoT platform named OneNET
Legal
Environmental
1. Ericsson and China Mobile sign strategic agreement to cooperate on IoT1. Adherence to the G4 Sustainability Reporting Guidelines published by GRI
2. Climate strategy with energy saving and emission reduction
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Political

1. Regulatory and policy changes: There are frequent interventions in the domestic Chinese telecom industry by the Chinese government. In 4Q15, the Chinese telecom companies were required to launch a one-month data rollover plan. Although this policy change didn’t have any impact on the cash flow, this policy change in fact delayed one-third of the telecom company’s data revenue recognition during the quarter. The FY 2015 total revenue which was well on its track to grow at 7.3% YoY, grew only at 4.2%. EBITDA margin was of 36.3% instead of 39.1%. Recurring NP would have grown at 1.6% YoY instead of declining at 12.1% YoY.

Economic

1. Significant GDP growth rate: Over the past five years, the Chinese economy is experiencing a significant GDP growth rate. If it continues to increase at the same pace then it may soon surpass the US GDP. The increase in the GDP suggests that each citizen of China is adding more value towards the society, therefore increasing the purchasing power of the consumers. The availability of cheap labour further adds to the profitability of the company.

2. High bargaining power of the customer: China Mobile basically deals in high volumes of customer rather than premium customers, thus the customers are mainly attracted towards the low-price offering of the service provider. The switching over cost is low which leads to the increase in the bargaining power of the customer.

Social

1. High literacy rate: Literacy rate in China is over 90% and there are over 420 million internet users in the country. Having a huge number of people who are already tech savvy makes it easier for China Mobile to sell their 4G services and gain a sustainable competitive advantage over their competitors.

2. Strengthening connectivity and value co-creation: The Company created an open and win-win new industry ecology of value co-creation. It comprehensively provided intelligent services for corporate and governments to serve over 5 Million customers. It also offered various solutions to sectors such as public administration, education, healthcare, finance, transportation and energy to drive and upgrade the industry transportation.

3. Innovative social development towards improvement in people’s livelihood: The Company had a focus on specific issues pertaining to social development and thereby conducted innovative development of information applications which was aimed at benefiting the people. It provided practical support towards the improvement of people’s livelihood in various aspects which included establishment of intelligent agriculture, rural healthcare and safeguarding of urban food safety.

Technological

1. Proactively tapping the household market by expanding range of home broadband products: The China Mobile group has devised plans to proactively tap into the household market. It has endeavoured to spread its market offering in homes by expanding its range of home broadband products. Its home digital product ‘Mobihae’, which is a set-top box providing high-definition video on demand, has recorded an encouraging result with the total number of subscribers surpassing 22.8 Million.

2. Surpassed the industrial benchmark in NFC and e-wallet business: A consistent effort towards optimization of customer experience, including the launch of competitive digital service, has resulted in products being expedited. The group has managed to obtain various achievements in 2016, among which the “One Hundred Schools Project” under the Near-field communication (NFC) business was successfully concluded, and “and-wallet”, which is CM’s mobile payment service, recorded total transaction value of over RMB1 Trillion.

3. Launched an IoT platform named OneNET: The CM group established the world’s largest dedicated core IoT network with more than 100 Million connections at the end of 2016. The group also launched the market leading OneNET platform, which is an open IoT platform that aims at nurturing and accelerating the growth of IoT industry ecology. Their current IoT platform connects more than 7 million devices which serves around 30,000 developers and more than 3,000 companies

Legal

1. Ericsson and China Mobile sign strategic agreement to cooperate on IoT: China mobile communications and Ericsson signed a strategic agreement to cooperate on the IoT at the China Mobile Global Partner Conference in Guangzhou on December 20, 2016. With the use of Ericsson Device Connectivity platform, China Mobile will streamline the process for provisioning IoT as well as deploy services to capitalize on new business opportunities. China mobile is expecting to have 200 Million IoT connections by 2017.

Environmental

1. Adherence to the G4 Sustainability Reporting Guidelines published by GRI: CM group monitors its environmental performance and reports on its progress in their annual Sustainability report in line with the G4 Sustainability Reporting Guidelines published by the Global Reporting Initiatives (GRI). They engage a third party which performs assurance procedures on their key performance indicators based on ISAE3000. They also participate in disclosure initiatives such as the Carbon Disclosure Project.

2. Climate strategy with energy saving and emission reduction: In order to address the Climate change and make ecological progress, China Mobile promotes a climate strategy with energy saving and emission reduction at its core. It also strives to reduce its energy consumption and carbon dioxide emissions. They also work together with their value chain stakeholders and customers to reduce carbon dioxide and minimize environmental impacts.

To get the complete detailed PESTLE report on China Mobile Communications please mail us at: support@swotandpestle.com. or contact us here.

China Mobile Communications PESTLE analysis has been conducted by Devang Vinchhi and reviewed by senior analysts from Barakaat Consulting.

References

1. China Mobile Communications Corporation Annual report 2016- http://www.chinamobileltd.com/en/ir/reports/ar2016.pdf

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