CCID Consulting: Expenses Have Become the Biggest Obstacle for Users to Experience 3G.

Survey Report on Commercial 3G Applications

BEIJING -- CCID Consulting, China's leading research, consulting and IT outsourcing service provider, and the first Chinese consulting firm listed in Hong Kong (Hong Kong Stock Exchange: HK08235), released its article on China's commercial 3G applications.

July-September 2009, CCID Consulting, a well-known consulting firm in China, and Sohu IT jointly launched A Special Survey on 3G Mobile Phone Applications. Online surveys were conducted. By September 18, a total of 4,473 validly completed questionnaires had been recovered.

The sampled population has the following features: In terms of age distribution, the 1970s generation and the 1980s generation made up the biggest percentage, accounting for 46.9% and 40.9%, respectively. In terms of monthly income, those with a monthly income of 2,000-4,000 Yuan accounted for 33.9%, while those with 1,000-2,000 Yuan and those with over 6,000 Yuan each accounted for slightly over 20%, and those with 4,000-6,000 Yuan accounted for 16.15%. In terms of monthly phone bill, users were divided into four tiers, namely, under 50 Yuan, 50-100 Yuan, 101-200 Yuan and over 200 Yuan. These four tiers accounted for 22.2%, 32.6%, 25.4% and 19.8% of the surveyed users, respectively.

3G terminal brands have a potential influence on users' network service cognition 

The survey shows that as far as consumer cognition of WCDMA, CDMA2000 and TD-SCDMA services is concerned, 58% of the surveyed consumers believed that WCDMA is better, while 14.1% held that CDMA2000 is better and only 4.3% insisted that TD-SCDMA is better. In addition, 16.4% of the responding consumers thought that the networks are different between the three systems but they did not know the details. Corresponding to this, for their first-choice 3G service provider, 44.2% of the users chose China Unicom, 26.2% China Mobile and 18.4% China Telecom.

The survey results show that 3G terminals have become the primary factor affecting consumer perception of 3G operational effect. Among the three 3G systems, CDMA2000 can be smoothly upgraded from 2G. Consequently, China Telecom has certain advantages in 3G network building at the current stage. Though TD-SCDMA made a late start, China Mobile nevertheless provides a sound guarantee for the development of TD thanks to its operating power in the 2G era and big user numbers. WCDMA is still in a stage of trial commercial use. Its network coverage, business promotion and user numbers are still very limited. One reason for high consumer recognition of WCDMA network services is the media coverage of successful WCDMA operation experiences abroad. Another primary reason is that WCDMA is supported by international mobile phone vendors including Nokia, Sony Ericsson and Apple iPhone. The influence of terminal brands has produced a potential impact on consumer cognition of 3G network services.

Consequently, in the 3G promotion period when services have yet to mature, consumer concerns are more concentrated on terminals. Carriers should use high quality and diversified terminals to nurture consumer perception of the 3G demand and promote services brands, and take this as the entry point for promotion, and strengthen user adhesion through diversified services. Meanwhile, as 3G services mature, less emphasis on technical standards and strengthened service brands will help promote 3G services.

Fig. 1 Minimum Consumer Cognition of Three 3G Systems
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Source: Sohu IT & CCID Consulting, September 2009
Fig. 2 Consumers' First-Choice 3G Service Providers
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Source: Sohu IT & CCID Consulting, September 2009

3G services need to be more diversified, and the services market still has huge potential

The survey shows that in the use of 3G netcard and netbook services, 31.7% of the users selected web page browsing, while 28.1% mobile office and mail receiving/sending, 16.1% download services and only 8.9% simple online games. As for 3G mobile phone applications, 44% of the users selected high-speed Internet access through mobile phone, 18.9% videophone, 16.8% mobile TV and video and around 10% mobile phone music and mobile phone games.

As for 3G terminal services application, the survey results show that Internet services have a great appeal to consumers. Meanwhile, consumers tend to access Internet content-based basic services through 3G network channels, which is still an extension of Internet services. Mobile payment, video conference and various other 3G application services still need to be developed and promoted. At the same time, while diversifying mobile Internet services, carriers should develop service delivery and highly segmented customized services based on the characteristics of the mobile Internet. This will become one of the key areas for carriers' services development.

As for 3G netcard and netbook services, users are more inclined to choose web page browsing, mobile office, mail receiving/sending and other basic or commercial services. On one hand, due to small 3G network coverage, web page browsing, mobile office and other services have relatively low requirements for network quality and thus are more suitable for the network infrastructure at the current stage. On the other hand, regarding the demand for business services, carriers should strengthen efforts to promote netcard and netbook services among special target business trip groups as well as other key services.

Fig. 3 Users' Choices for 3G Netcard/Netbook Services
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Source: Sohu IT & CCID Consulting, September 2009

Fig. 4 Users' Choices for 3G Mobile Phone Services
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Source: Sohu IT & CCID Consulting, September 2009

Expenses have become the biggest obstacle for users to experience 3G

The survey shows that almost half of those surveyed users who had not bought a 3G mobile phone made it clear that they did not want to buy it, and a majority of consumers who intended to buy still took a wait-and-see attitude and would make a decision after people around them have bought one. 45.5% of the surveyed users said that they would not buy a netcard in the near term. The figure was 63.7% for a netbook. As for the reasons why they had not bought a 3G mobile phone, the factor of expenses (including use fees and mobile phone price) accounted for 43.8%, while application services, network and mobile phone variety factors accounted for 15.8%, 15.5% and 14.1%, respectively.

Given that the majority of the samples surveyed online actually show a high degree of acceptance to 3G products, users in the real market may have a clearer wait-and-see attitude towards 3G. Expenses have become the biggest obstacle for users to experience 3G services. Regarding this situation, carriers and mobile phone makers not only should jointly develop and introduce 3G mobile phones with a high price/performance ratio, but also need to use the free sharing model for Internet basic services in order to strengthen services promotion and ensure customer adhesion. Moreover, they may also provide optional personalized value-added services to raise their profit level.

Fig. 5 When Do Consumers Plan to Buy 3G Mobile Phone?
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Source: Sohu IT & CCID Consulting, September 2009

Fig. 6 Main Reasons for Decisions not to Immediately Use 3G Mobile Phone
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Source: Sohu IT & CCID Consulting, September 2009

Carriers' business hall is still the main channel for users to buy 3G products, while channel diversification makes a slow start

The survey reveals that as for 3G sales channels, 52.3% of the surveyed consumers chose carriers' business hall, 16.7% Gome, Suning, Carrefour and other malls, 14.6% online shops and 13.6% computer malls.

The survey shows that the carriers' business hall has become the top-choice channel for consumers to buy 3G products. There is a strong link between 3G terminals and services. Carriers will mostly adopt the model of bundle sales of terminals and services packages. This will greatly increase the share carriers' channels have in terminals sales. However, due to the low coverage of business halls and consumers' shopping inertia in buying mobile phone from social channels, carriers need to step up their efforts to sell 3G terminals through social channels while improving their own channel building. Carriers are now strengthening their cooperation with mobile phone malls and other social sales channels, and have expanded their cooperative services from mobile phone sales to serial terminal services, including network entry, number supplement, fee payment and value-added services. However, consumers' current cognition and selection of 3G product sales channels show that carriers' channel diversification and publicity effects have not produced satisfactory results. It is necessary for them to provide more convenient channel support for the large-scale marketing of 3G terminals.

Fig. 7 Prior Channels Which Consumers Choose to Buy 3G Products
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Source: Sohu IT & CCID Consulting, September 2009

About CCID Consulting

CCID Consulting Co., Ltd. (hereinafter known as CCID Consulting), the first Chinese consulting firm listed in the Growth Enterprise Market of the Stock Exchange (GEM) of Hong Kong (stock code: 8235.HK), is directly affiliated with China Center for Information Industry Development (hereinafter known as CCID Group). Headquartered in Beijing, CCID Consulting has so far set up branch offices in Shanghai, Guangzhou, Shenzhen, Wuhan and Chengdu, with over 300 professional consultants after many years of development. The company's business scope has covered over 200 large and medium-sized cities in China.

Based on major areas of competitiveness: industrial resources, information technology and data channels, CCID Consulting provides customers with public policy establishment, industry competitiveness upgrading, development strategy and planning, marketing strategy and research, HR management, IT programming and management. CCID Consulting's customers range from industrial users in electronics, telecommunications, energy, finance, automobile, to government departments at all levels and diversified industrial parks. CCID Consulting commits itself to becoming the No. 1 advisor for enterprise management, the No. 1 consultancy for government decisions and the No. 1 brand for informatization consulting.