According to a recent report by CCID Consulting Co Ltd, a Hong Kong-listed information industry consulting firm, about 500 million Chinese people (one out of every three people in the country) will own a mobile phone by the end of 2007, with 30% of users owning phones that would be compatible with the next generation of mobile telecom technology.

As China's mobile phone penetration grows to one-third from the current 18%, the value of the telecommunication-related market will reach US$62.65 billion in 2007. "The new mobile phone users will create a multi-billion-dollar market," Li Dongping, an analyst at CCID, said in the latest report. He also predicts that 30 percent of Chinese mobile phone users will have third generation handsets in 2007.

However, to grab a share of the market, phonemakers have to survive the competition and price war on the Chinese mainland, which has caused prices and profit margins to sink. Ningbo Bird Corp, the largest home-grown handset maker which announced its third quarter earnings yesterday, is a good example of how tough the market is — during the three-month period ended on September 30, the Zhejiang-based company's profit margin dropped to 16.7 percent from last year's 23.84 percent. Bird said its profits in this quarter jumped 9.8 percent to 60 million yuan, or 0.38 yuan a share, compared with a year ago, while in the period, the company's revenue rose 38.6 percent to 2.26 billion yuan.

Meanwhile, mobile phone operators are also expanding their business scope to improve their income as average revenue per user is declining too. "China Mobile and China Unicom, the current mobile operators, have already begun to provide value-added services such as short message system, or SMS," according to Li of CCID, adding that other services being offered to customers include receiving and sending e-mails, down-loading games and being able to browse Websites on their mobile phones.

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