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China Telecom goes after rural users

The countryside and villages may be the final frontier for all Chinese mobile service providers but China Telecom seems to be gaining fast in the fight for this high potential market.

The challenges in reaching end users in China's vast countryside are obvious. Average spending power is lower. The disjointed transportation links mean mobile phones pass through the hands of multiple sellers, adding to the price. Finally, locally produced imitations of popular models are the norm rather than the exception. Still the fact that China Telecom sold six million phones to users in China's rural villages last month proves it's worth the trouble.

The real hands-on work of driving sales falls to local agents. China Business News spoke with one agent, whom they called Hu Ling for the interview. Based on her nine years’ experience she said that the market in rural villages definitely has potential.

“A lot of people there already have smart phones. They tend to just go for the big phones with four inch screens. They don't pay much attention to brands” she said.

Still it's not easy for Hu Ling. Some months she only sells 20 phones at a profit of 100 to 200 RMB ($16 to $32), and 50 RMB ($8) of that may go to another local retailer, further eating into her profit.

So what has China Telecom done for small time agents like Hu Ling? First of all they're doing the obvious and selling their phones for 10% to 20% less than the competition. That makes the agent's job easier. But China Telecom has taken care of an even more frustrating problem for small scale sellers. They have set up a website to simplify the wholesale buying process and cut associated costs.

The website, called BaiKeWang, allows small scale sellers to buy just a few phones at a time but pay shipping rates that are competitive with large scale retailers. They can also take advantage of any special offers China Telecom might be offering. Hu Ling said it has allowed her to save about 10% and added that “this platform is like a provincial level buyers alliance.”

The success of China Telecom's approach is reflected in the continuing rise in the number of rural users. But the competition isn't standing still either. China Mobile is still by far the market leader. And China Unicom is going after rural users with a different strategy. They provide service and support from vans where people can't get to their stores. Who said state owned industries couldn't be innovative?

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