Staff provide services to customers in a branch office of China Telecom in Yichang, Hubei Province. Photo: IC
To buy or not to buy - that is not the question.
For many a Chinese handset user already addicted to smartphones, it has become growingly natural for them to purchase smartphones offering con-venient access to a wide range of func-tionality via mobile networks, instead of relying on more traditional phones.
China's smartphone market is full of optimism, as there is little doubt regarding the growing popularity of smartphones across the country. The nation's smartphone population is esti-mated to total 76 million for the whole year, accounting for 17 percent of the total handset population, according to research firm Gartner Inc.
By 2015, there will be 266 million smartphone users across the country, with the percentage rising to 45 percent of mobile-phone users, Gartner fore-cast.
The only remaining question is whether to buy no-strings-attached devices or those featuring fixed-term contracts. While there remain a number of users preferring to buy smartphones via open channels, there have also been an increasing number of consumers attracted by the favorable bundled ser-vices and prices offered by operators.
"I bought an iPhone 4 with a two-year contract from China Uni-com, which is equivalent to paying a monthly fee of 386 yuan ($60.72) for call charges as well as mobile Internet services, while getting the iPhone free of charge," said a young woman sur-named Liang working at a private firm in Beijing. "It is definitely wiser than just buying an iPhone."
There have been more and more consumers like Liang lured by attractive operator subsidies. China leapfrogged the US to become the biggest smart-phone market in the world in terms of volume in the third quarter, Boston-based research firm Strategy Analytics announced in late November, citing ag-gressive operator subsidies - in which telecom carriers provide discounted phones for consumers to lure them into long-term contracts - as an important factor driving such a growth.
Smartphone shipments rose 58 per-cent to hit a record 23.9 million units in China in the third quarter, while shipments in the US fell 7 percent from the previous quarter to total 23.3 million units, according to the research firm.
Growing clout of operators
"Sales of no-strings-attached smart-phones via open channels in the coun-try still accounts for a major proportion of the total smartphones sales; however, there is a growing trend of telecom operators achieving more clout in the smartphone arena," said Shen Zheyi, research director in the mobile devices and consumer services group at consul-tancy firm Gartner in Shanghai
In addition to domestic handset makers, such as Lenovo, ZTE and Hua-wei, foreign smartphone brands includ-ing Apple, Samsung and Motorola have also strengthened cooperation with the country's three telecom operators.
Motorola Mobility unveiled its new Droid Razr in China early last month, and will soon introduce the device's cus-tomized version with China Mobile as well as China Telecom subsequently.
"The increasing penetration of mobile Internet services has provided a good platform for smartphones, and China Mobile will invest more in outsourcing smartphones," Li Huidi, assistant president of China Mobile, said while launching the Droid Razr's TD-SCDMA version in late November
Subscribers of TD-SCDMA us-ers have reached 45 million, and are expected to hit 50 million by the end of the year, according to Li.
"The country's telecom operators have been more willing to be involved in launching smartphones, as smart-phones allowing users to access third-generation networks could generate much higher average revenue per user," said Wang Yang, director of China research at research firm iSuppli Asia Shanghai.
Though the influence of China's telecom operators is still not on par with that in more developed markets, such as Japan, where over 90 percent of smartphones are sold with bundled services, and the US, where more than 70 percent of smartphones are sold via opera-tors, high-growth momentum of operators' influence in the arena is expected, according to Wang. Sales of smartphones via operators represented roughly 40 percent of the total sales volume this year, and the ratio is likely to rise to 70 percent in the next three years, he forecast.
While more smartphones are ex-pected to be sold with bundled services from telecom operators, analysts also pointed out that operators will mainly compete with relatively lower-end smartphones.
"It would be more cost-effective to offer subsidies for cheap smartphones, mostly manufactured by domestic handset makers, selling for around 1,000 yuan," said iSuppli's Wang.
Operators have also felt the pinch of aggressive smartphone subsidies, Wang noted, holding that subsidies for high-end devices like the iPhone or the Droid Razr could help attract high-end users, while subsidies for cheap smartphones could spur greater smartphone penetra-tion overall.
Prices of smartphones have started trending downward since the third quarter, partly driven by handset mak-ers targeting low- to middle-end users by means of operator subsidies, said Wang Ying, an industry analyst with research firm Analysys International.