Opportunities Identified in Chinese Mobile Telecommunications - According to IIR Group


IIR Group Plc (LSE: IIR.L) has identified key growth indicators within the Chinese Telecommunications Industry.


[PressFlow.co.uk, Apr 29 2008] IIR Group Plc (LSE: IIR.L), the UK's leading source of impartial research and strategy for global equities and currencies, and creator of The Research Oracle - an online tool available to retail investors providing institutional-grade research analysis on the top 400 global stocks completely free of charge, has identified key growth indicators within the Chinese Telecommunications Industry. The Beijing Olympics, continued economic growth, industry price cuts, sector restructuring, the launch of 3G services and continued fixed-to-mobile telecommunication migration identified as creating ideal market conditions for significant sector growth and ripe for investment.

Vinh Cam, Chief Operating Officer For IIR Group Plc said: "The Chinese telecommunications industry has witnessed significant growth in subscribers and revenues over the last decade, resulting in China Mobile becoming the largest mobile operator in the world. The continued domestic economic growth, allied to factors such as industry price cuts, continued fixed to mobile telecommunication migration, potential industry restructuring leading to increased competition in the market sector, the 2008 Beijing Olympics and the subsequent potential launch of 3G services are key factors in creating ideal market conditions for growth".

As a sector within the fastest growing major economy in the world, the Chinese telecoms industry has ridden the wave of massive economic expansion which has resulted in rising consumer purchasing power. Cygnus Business Consulting Research has indicated that the Chinese Communications Industry generated RMB 7,311.6bn in revenues in FY 2007, up 11.3% from FY 2006. Subscriber growth was even more marked, up by 9.5m additions in February alone, resulting in a total of 565m subscribers by the end of February 2008 (source: Chinese Ministry Of Information Industry).

Despite this marked growth, IIR Group plc forecasts further rapid sector growth ahead, particularly within the rural sector. Mobile penetration in rural China is currently at 19% compared to 40% in urban areas, a factor which when linked to the Chinese Government's focused development of the rural economy, suggests significant room for continued growth.

In addition, in February 2008, China's telecommunications regulator announced price cuts for long-distance wireless phone calls within the country by as much as 50%. Although this is expected to put pressure on Chinese wireless operator's ARPU (Average Revenue Per User), the proposed price cut is expected to enable wireless operators to accelerate subscriber gains from fixed-line phone operators.

Increasing Fixed-To-Mobile migration has had a significant impact on fixed-line operators with fixed-line subscribers falling 3.26m in the first two months of this year to 362m in February, further degrading fixed-line MOU (Minutes of Usage). IIR Group expects Fixed-to-Mobile migration to increase for the foreseeable future and will act as one of the primary growth drivers for the Chinese mobile industry.

Short term growth drivers include the implementation of the CPP (Calling Party Pays) regime in China as well as the Beijing Olympics games, to be held later this year, which is expected to drive mobile Internet usage during the duration of the games. IIR Group anticipates that 3G services will be launched in China during the Beijing Olympic Games further intensifying growth in value-added services for Chinese mobile operators during 2008.

Further to speculation regarding the restructuring of China's telecommunications industry, which would widen access to the mobile phone market, reports by Shanghai Securities suggest the telecommunication industry restructuring plan will be announced within the second half of 2008. It is estimated the restructuring could lead to the break up of China Unicom, with the potential for its GSM network to be merged with China Netcom and its CDMA division being integrated with China Telecom. If implemented, the restructuring would result in three cellular operators compared to the current two, intensifying competition within the market.

As the largest mobile market in the world, the increased competition will ultimately expand the entire market leading to higher subscriber numbers and revenues as well as stock valuations for all companies in this sector.



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About IIR Group
IIR Group plc was established in 1996 and is the UK's leading source of impartial research and strategy for global equities and currencies for broker-dealers, investment banks and asset managers. The company is headquartered in London and traded on AIM (LSE: IIR.L). The IIR Group has no research conflicts - as it does not offer brokerage, investment banking or asset management services. IIR's research activities are regulated and authorised by the FSA and registered as an investment advisor with the SEC. .

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