The future fortunes of China's big four telecoms operators will depend greatly on their performance in rural markets as they have reached saturation point in urban areas, according to industry analysts.

The slowdown in urban penetration will continue the government issues its first batch of third-generation (3G) licenses, which is unlikely to happen until early next year.

"The trend is very clear," said Tang Li, a senior research analyst at Pacific Crest Securities. "They have to tap the potential in rural markets for further development."

"They must win more new subscribers in order to make up for a falling average revenue per user," said Gordon Wong, an analyst with South China Research.

In the first six months of the year, China Mobile, the world's largest cellular operator in terms of both users and market value, outperformed China Unicom, the smaller of the mainland's two mobile operators, recruiting 80 percent of new subscribers, many in rural areas.

This aggressive rural expansion contributed greatly to China Mobile's 25.5 percent year-on-year rise in net profit in the first half of 2006, beating China Unicom's 20 percent.

Analysts do not expect China Unicom to regain its lost ground in the second half of this year.

China Mobile's full-year profit could jump 24.4 percent to US$8.2 billion, while China Unicom is likely to post a 14 percent growth to US$693 million, according to a median of eight analysts in Hong Kong and Shenzhen surveyed by China Daily.

In comparison, China Telecom and China Netcom, the two fixed-line operators, failed to boost their rural business in the first half of the year.

"Slow progress in rural markets and competition from mobile operators squeezed them," Tang said.

(China Daily September 22, 2006)