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Last Updated: Monday, 27 October, 2003, 17:13 GMT
Chinese phone maker's fancy footwork

Mary Hennock
BBC News Online business reporter in Shenzhen

Kok Kin Hok appears to be grooming himself as China's Roman Abramovich, the Russian billionaire who has bought English Premier League football club Chelsea.

Chinese player Li Tie in Everton strip
Li Tie is known as 'China's David Beckham '

Mr Kok has some way to go. But he owns a local team in Shenzhen, while Kejian, the mobile phone firm he heads, sponsors Chinese midfielder Li Tie's contract with Everton in exchange for plentiful publicity back home.

Everton players wear Kejian's name and logo on their shirts. Not bad for a company which calculates it has only 3% of China's mobile phone market.

Kejian uses its Everton ties to promote its brand in China, where Premier League games attract huge audiences. Anything from 100 million to 360 million people are likely to watch.

"They've not had to do a lot of advertising out of it - Premier League is the most watched foreign sport in China," says Tor Petersen, managing director of sports consultancy Zou Marketing, which is Li Tie's brand advisor.

Big league branding

Samuel Lam, Kejian's marketing chief who joined from Samsung, wants a "healthy, energetic, upmarket" look equally appealing to men and women.

Mr Petersen, who says Zou did not negotiate the Everton deal, thinks it has "created an incredible awareness that allows them to catch up with a Nokia or a Motorola" in visibility.

China is already the world's biggest handset market, with 250 million subscribers. Yet it offers huge scope for growth.

Nationwide less than one fifth of people own mobiles, compared to Beijing - or Europe - where 70% do.

The battle for expansion is being fought in China's vast hinterland, where analysts say local brands are proving more fleet-footed.

The weapons are design, distribution and branding.

Nationally local brands are starting to kick the shins of top sellers Motorola and Nokia, whose lead is shrinking. Siemens recently admitted it needs to pay more attention to distribution in small cities.

Analysts expect local manufacturers to capture 50% of the handset market by end-2003, compared to just 10% in 2001.

"There's no shame in local brands anymore," says Duncan Clark, head of technology consultancy BDA China.

But don't expect a Chinese mega-brand anytime soon in this ultra-fragmented market.

Squeezing foreign brands

Thirty rival handset makers - 20 home-grown - are battling it out in a market glutted with unsold phones and plagued by falling prices.

Woman using mobile phone
Wealthy coastal cities have high mobile ownership levels

The Sars flu crisis worsened the spiral, as factories kept producing but few Chinese went shopping. By mid-summer, manufacturers had about 20 million unsold handsets.

This was when Chinese firms' better inland distribution networks really started to show, and their market share raced upwards.

"We're a local brand so we start with the smaller cities," says Mr Lam. "We don't have enough pull power, so you have to rely on the push."

Bird, ranked second among local brands, had also targeted smaller cities early on to avoid a face-off against foreign brands' kudos in glitzy, accessible Beijing or Shanghai, says BDA analyst Zhang Dongming.

Kejian's vital statistics
2002 Sales 3.1bn yuan ($379m ; 223 m)
2002 Profits 62.8m yuan ($7.6m; 4.5m)
That strategy is now paying off with a strong distribution network where it counts.

Local brands seem to be better at offering customers plenty of price cuts, loss leaders and usherette-style promotions in shopping malls.

Sometimes the competition gets physical as postering teams come to blows. "People even fight for getting a certain location - it happens," says Mr Lam.

Posher, not bigger

Price wars have not tempted Chinese phone firms to turn stingy with their front line troops. Salesmen can earn up to 10 times more by selling a Chinese brand than a global leader, says BDA's Ms Zhang.

Kejian production line
Kejian sees technology getting simpler

Kejian views chasing high sales volumes in a market where they are so readily available as pointless. A 20% increase in China's subscribers would be 46 million phones.

"This market will be stable because the replacement market is huge," says Mr Lam.

So Kejian is sticking to its upmarket image and prices in pursuit of high profit margins; it is poised to introduce its costliest phone yet, at 4,000 yuan ($483; 285).

Rival TCL, the biggest Chinese phone maker, has got women buying by putting real, if tiny, diamonds on its phones.

Display stand
Kejian has Li Tie's image on everything, even screensavers

"Basically we see mobile phones as a fashion item...it's fashionable identities, like you buy your clothes," says Mr Lam.

Kejian believes the technological advantages of global players are a thing of the past as mobile phones are increasingly kit assembly products.

It picked Korean firm Samsung as a role model and ally for its mix of quality components and trendy styles. Samsung popularised clam shell phones, for instance.

They have a joint venture for CDMA technology and make products for each other. About 40% of Kejian's phones are Samsung technology, but it does its own research and design too.

Li Tie everywhere

With quality taken care of, Kejian's biggest focus is its brand image, and that means football.

Kejian stamps football on everything its does. It is looking ahead to the Beijing Olympics in 2008, when it hopes to build on its sporty image, and its head start in China's fledgling sports sponsorship market.

Kejian President Kok Kin Hok (centre) with Li Weifeng (right) and Li Tie
Mr Kok wants to be China's Roman Abramovich

Mr Lam refuses to say what Kejian paid towards Li Tie's three-year contract at Everton, which he calls a "turning point", yielding "10 times" more benefits than previous sponsorship of a nationally prominent Chinese team.

Kejian's neat footwork has dodged hefty TV advertising bills by hiring a Chinese journalist in Liverpool to produce soccer stories for distribution to Chinese TV stations and sports websites.

Go to China's biggest internet portal, Sina.com, click on Premier League and Kejian's logo bobs up, along with Li Tie jogging with the Everton squad.

Kejian's strategy is hard to copy. "There aren't enough Chinese players capable of playing at that level," says Mr Petersen.

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