Online Extra: China Mobile's CEO Talks Expansion

The world's largest cellular service provider is looking to extend its reach still furtherboth at home and abroad, says CEO Wang Jianzhou

With its more than 300 million subscribers and market capitalization of $198 billion, Hong Kong-listed China Mobile is the world's largest mobile service provider. It's aggressively expanding mobile service into the interior of China and rolling out new value-added services including ringtones, music downloads, and mobile Internet across the Mainland.

And on Jan. 22, China Mobile announced it was expanding overseas by buying 89% of Paktel, Pakistan's fifth-largest cellular carrier. BusinessWeek Beijing Bureau Chief Dexter Roberts recently sat down to talk with the fluently English-speaking 58-year-old chairman and CEO Wang Jianzhou at company headquarters in Beijing. Edited excerpts of their conversation follow.

How important is expansion into the Chinese countryside for China Mobile?

The rural areas are very important. It's a huge market with huge potential. In Beijing, the mobile penetration is very high—close to 100%. But in rural areas, it's closer to 12%. In China, 700 million people live in rural areas. And farmers are already really starting to use mobile phones, and that's not only for voice but also for short messages. This is a trend that will continue into the coming years.

How important is market segmentation in providing service to such a large market as China, with both urban and rural customers?

Of course, China is a very large market—we ourselves have over 300 million subscribers. And different customers have different requirements. So we must provide different services for them. Segmentation for China Mobile is very important. It's our strategy.

So we provide our Go-Tone service for wealthy customers where we can offer them VIP lounges in airports. And then we also have M-Zone, which focuses on young students who are most interested in short messaging services [and music downloads], for example. And now we have our rural information service, too.

How important is the expansion of value-added services like ringtones, music downloads, and mobile Internet for China Mobile? And why will these services grow quickly in China?

We want to make the cell phone into a new medium. And one advantage is the big number of cell-phone users in China—there are more mobiles than all the televisions and computers in China—there are some 450 million people in China with mobile phones. Another advantage is people carry their mobile phones with them every day. And it's also easier to charge our customers through their phones for these services.

But we have no plan to do content ourselves, so we need partners. After our purchase last year, we're the second largest shareholder of Phoenix Satellite Television Holdings. That will allow us to get news programs earlier than any other operator. And secondly, because we are partial owners, we should get a large discount on their information.

Can you talk a little about China Mobile's expected role in the coming 3G mobile rollout in China, and whether your company will focus on developing China's indigenous TD-SCDMA 3G standard?

China Mobile is preparing for the 3G rollout, and we're waiting for the issuance of licenses. Our parent company, which is state-owned, is doing a trial system with TD-SCDMA, and it's going smoothly. That's all I can say.

How important are overseas markets for China Mobile's future expansion? And what particular markets are of interest?

We would like to increase our influence in global markets. And we're particularly interested in emerging markets. But we aren't interested at all in mature markets like North America and Western Europe. Our advantages are that, first, we're familiar with emerging markets. Their experiences may be very similar to ours. Second, with our very large scale, we can reduce our procurement costs.

But international expansion isn't the main purpose. Our purpose is to find new opportunities to make more earnings for our shareholders. So we must be very careful about how we expand.

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