China Mobile, China Unicom and China Telecom, which recently announced plans to launch mobile apps stores, face an uphill climb competing against global players such as Apple's App Store and Google's Android Market, which have already built the experience, tools and processes to meet the needs of both developers and users, Sherrie Huang, a Hong Kong-based analyst with Ovum, said in a report Thursday. They will also find it tough to win over local subscribers, who typically prefer free mobile apps, she said.
However, Chinese operators can still catch up by leveraging their local footprint, Huang said, noting that global apps stores are not as prominent in the Chinese market, compared to more matured markets, and find China difficult to penetrate.
Local operators should then tap their huge subscriber bases and establish "economies of scale and a strong negotiation position", she added.
Chinese operators also benefit from having local presence, which will prove critical in facilitating payments for mobile apps. According to Huang, while credit card ownership in most matured markets is high, and e-commerce is common and widespread, this is not the case in China where online financial transactions are unpopular due to security concerns.
So when it comes to charging for apps, Chinese apps store operators can provide a more secure and convenient billing method, where additional charges from apps downloads can be included in the subscriber's monthly bill, she said.
To succeed in the market, she noted that Chinese operators need to move fast to learn from existing players or establish partnerships with these global players to enhance their apps ecosystem.
Huang added that local operators should, to reduce complexities, look at promoting applications that are not "device sensitive". These telcos should also combine their apps business with service delivery, such as selling their current content and value-added services on the apps store, and offering apps that are exclusively provided by the operator or that require continuous charging.
Huang said: "We are generally skeptical about the likelihood of operator-driven app stores catching up with those [run by] handset vendors and third parties, but we believe that [China's] dominant operator, China Mobile, has a good chance of succeeding. It has a huge mobile subscriber base, solid experience with mobile services and a good brand image."
She added that China Mobile's partnerships with leading handset vendors such as Nokia and Research In Motion (RIM), as well as developing its own handset operating system--the OPhone, launched in August--will help the Chinese operator stand in good stead.
China Mobile, the country's largest mobile carrier, unveiled its Mobile Market apps store Aug. 17, and recently announced it would be charging users for software and games downloads, which were previously offered free, together with other apps.
Its competitor China Unicom Shanghai, launched its WO-branded 3G store and has further plans to develop a separate "ground-level application store", while China Telecom opened its eSurfing Space Application Market in October, according to Ovum.
The research firm estimated that from end-2008 to end-2014, the number of app downloads from non-operator channels worldwide will grow from 491 million to 18.7 billion. In the Asia-Pacific region, the number will grow from 27.8 million to 3.7 billion.
Huang added that mobile apps demand in China will be one of the industry's major drivers, and growth in this market segment is expected to be higher than in the overall region.