Investment

China Mobile to take on Baidu with search engine

By Edmond Lococo, Mark Lee and Stephen Engle (China Daily)
Updated: 2010-09-17 07:47

A mobile phone user sits inside China Mobile's business lobby in Nanjing, Jiangsu province. An Xin / For China Daily

Company turns to data services for growth as wireless market slows

BEIJING - China Mobile Ltd, the world's biggest phone carrier by customers, plans to start an Internet-search engine next year, challenging Baidu Inc, as the slowing wireless market leads the company to data services for growth.

"Because the penetration rate of mobile phones in China is very high, it's very normal that we have a growth slowdown," Wang Jianzhou, chairman of China Mobile Ltd, said in an interview on Wednesday at the World Economic Forum in Tianjin. "Many shareholders ask us 'What will be your next source of growth?' We think the next source of growth will be data."

The move to enter a market led by Baidu may highlight the end of the type of growth that helped China Mobile's revenue jump almost sevenfold. The operator joins carriers in the United States, Europe and Japan in turning to data services to spur earnings as the Chinese phone market saturates.

"For China Mobile to get a meaningful contribution from new businesses, they really have to turn into big successes to make a difference, as the company is so big," said Jim Tang, who rates the stock "neutral" at Shenyin Wanguo Securities in Shanghai. "China Mobile gets about 70 percent of its revenue from voice, and growth is completely flat there."

China Mobile has gained 6.7 percent in Hong Kong trading this year, underperforming China Unicom (Hong Kong) Ltd's 14 percent gain and China Telecom Corp's 30 percent advance, amid concerns about the company growth.

China Mobile's revenue will rise 7 percent to 484 billion yuan ($72 billion) this year, according to the average of 29 analyst estimates compiled by Bloomberg. That would be the slowest increase since the company's 1997 Hong Kong listing and the analysts estimate growth to keep decelerating through 2012.

Growth is slowing as more than 60 percent of China's population owns a mobile phone, compared with less than 10 percent at the beginning of the decade.

"There is less growth potential in China Mobile now than there was," Paul Wuh, an analyst at Samsung Securities Co in Hong Kong, said last week. "They are just not growing that fast anymore."

China Mobile Communications Corp, parent of the listed company, last month reached agreement with China's official Xinhua News Agency to partner in Internet search.

The partnership will lead to the creation of a venture that should begin providing Internet search service next year, Wang said.

Details on the division of ownership between Xinhua News Agency and China Mobile are yet to be determined, Wang said.

The new search engine will be available for personal computers and mobile phones, Wang said.

China Mobile won't exclude market leader Baidu's search engine from phones on its network, he said.

Baidu, based in Beijing, controls 71 percent of China's Internet search market, followed by Google Inc's 27 percent, according to estimates at research firm iResearch. Baidu leads the mobile-Internet search market with a 34.3 percent share, the South China Morning Post said on Tuesday, citing research company Analysys International.

"It is a very competitive market," Wang said of Internet search. "It still has huge potential for growth. We'd like to use our advantage of mobile phone users to create a new service."

Mobile Internet and other data services will be key to maintaining revenue growth, Wang said.

Data traffic more than doubled in the first half of the year, he said.

Bloomberg News