China Mobile's Growth Relies on Rural Areas

Rural China is an important source of new subscribers for China Mobile Ltd., underscoring just how saturated the market for cellular phones has become in Chinese cities.

China Mobile had 332.4 million subscribers at the end of June, having added an average of 5.2 million new subscribers each month during the first half of the year. Of that number, half came from rural areas, said the company, which is the listed arm of China's largest mobile operator.

"[The] rural market contributed significantly to our overall performance," China Mobile said in a presentation Thursday detailing its financial results for the first six months of the year.

China Mobile reported a first-half net profit of 37.9 billion renminbi (US$4.97 billion as of June 30, the last day of the period being reported), up 26 percent from last year. Revenue was also higher, up 22 percent to 166.6 billion renminbi, it said.

China is the world's biggest cell phone market.

At the end of June, the country had 501.6 million mobile phone subscribers, according to the Ministry of Information Industry (MII). That represents a penetration rate of approximately 39 percent based on the country's estimated population of 1.3 billion.

Much of the rapid growth in Chinese demand for mobile phones and computers once came from the country's major cities, such as Beijing and Shanghai. But years of fast-paced economic growth and rising salaries have led to slower growth, as most urban residents already own a cell phone.

To maintain rapid growth, companies have been forced to look to China's smaller cities and rural areas, which are typically less developed and poorer than the country's major urban areas.

China Mobile is no exception. In addition to ringtone and music download services, the operator has developed a set of mobile and Internet services designed to woo rural users.

Launched last year, China Mobile's Agricultural Information Service provides advice on how to raise crops and animals, as well as weather, news, and information on market prices for various products. The information can be accessed using phones or the Internet. Subscribers pay 2 renminbi per month for each category of information they receive.

At the end of June, the Agricultural Information Service had 24.8 million subscribers, up 40 percent from the end of last year.

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