China's Mobile Value-added Market study in 2005

This report provides a comprehensive and in-depth analysis of China's mobile value-added market in 2005 as well as prospects and forecasts of the industry in the 3G era. The report integrates research findings in such areas as mobile payment, mobile commerce, phone TV, mobile video, mobile reading, etc.

China's mobile value-added market began rapid development in 2002. In 2004 the total market scale reached 29.83 billion Yuan, which is predicted to reach 41 billion by the end of 2005.

As communication fees are charged solely by mobile operators, who also occupy 15 percent of the information fees, most of the revenues from mobile value-added business go to mobile operators. SPs only have a small share of the cake. Fortunately, this cake is huge. Even for the small share of the SPs, the income is considerably big. In 2004, the market scale further increased to 8.4 billion yuan. By the end of 2005, the SP value-added services are predicted to reach a total market scale of 12.35 billion. To SPs, year 2006 will enter the 3G era.

Year 2005 witnessed the decline in SMS revenues for most SPs, while operators' revenues are increasing steadily. According to data released by MII, in the first five months of 2005, SMS traffic was 114.78 billion messages, up 39.6 percent from the previous year. During this period, mobile phone subscribers in China reached 358 million. Per capita message per month is 64. SMS business will reach the development peak in 2006, after when the development focus will be industrial applications.

In the past three years, MMS grew rapidly. However, due to influence of seasonal factors and the adjustment of operators� policies, it appears a wave-like growth curve. But the market scale is continuously increasing. By the end of 2005, MMS business is predicted to reach a market scale of over 2 billion.

IVR business will not be greatly influenced in the initial development stage of 3G. As 3G progresses, some data business will attract IVR users, which will result in market decline of IVR in 2006 to 2007. However, as IVR has strong business innovation capability, the decline trend will be moderate.

WAP business is currently in a stage of obvious market enlarging and has great growth potential. At present, it is the best time to enter. However, investors should not expect the coming of 3G will bring considerable return of WAP investments very soon. WAP itself is a channel, carrying most of the mobile contents. Its development is based on the development of mobile application contents. For this reason, the development of WAP business will be sustainable and steady growth.

Mobile phone ring tones, color tones and phone music belong to wireless music. They have the inherit relationships. In 2005, the mobile phone ring tone market scale will reach 1.8 billion and enter the market saturation stage. Color tones will exceed ring tones by the end of 2005 and reach 5 billion. In 2007-2008, color tone market will decline. Mobile phone music is likely to be the first fast-growing value-added business in 3G era. From the beginning of 2006, mobile phone music will take on a fast development trend and will exceed color tone with a market scale of 8 billion in 2007.

With the explosive development of music phones, related 3G value-added services will be continuously initiated. In the 3G era, cell phone video will be a 3G service worth attention the most after cell phone music. Market scale of cell phone video in 2006 will reach 1.5 billion yuan. However, phone video will not reach rapid development until after 2007. As video communication through mobile phones is realized, phone video business will expand considerably. But what will attract the most attention in the future will be the multimedia playback function on mobile phones.

Limited by high fees and poor representation form, the development of mobile phone games has been very slow. Considering breaking the limitations of terminals and network, real programmed games such as Java and Brew will not gain rapid development until after 2007.

After 2008, the building of 3G networks will enter the optimization and expansion stage. By then, many more new 3G value-added services will emerge, which will in turn stimulate the existing MMS and LBS services.