Later in 2010, China Unicom also readjusted its 3G mobile phone strategy away from the high end and towards the mid range. China Unicom still plans to launch several high-end models of WCDMA handsets this year, with a price of around CNY2,000, but will mainly focus on 3G smartphones in two price bands of CNY8001,200 and CNY1,2001,600.
Recently, the head of China Mobiles terminal department stated that China Mobile will increase its demand for medium- and low-cost mobile phones, especially TD-SCDMA handsets priced below CNY1,000.
Customers will be the winners as competition grows
Customers, rather than the operators or handset vendors, will be the main beneficiaries of this handset subsidy war.
Higher subsidies will attract new subscribers in the middle and low end of the market; we are expecting many mid-range and low-end mobile phones to appear during the next year. However, these subsidies will be a significant burden for China Telecom and China Unicom, neither of which has China Mobiles strong cash-flow position.
The operators handset strategies will bring opportunities for mobile phone manufacturers. We expect operator-customized 3G handsets to account for more than 45% of total handset sales. However, the Chinese operators high subsidies on mid- and low-cost 3G handsets have attracted the interest of many handset phone manufacturers, including foreign, mainland, and Taiwanese producers. We expect that the rising level of handset competition will put continued pressure on vendor margins, which have fallen sharply in recent years.
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