Telecom operators sharpen edge
By Xiao Chen (China Daily)
Updated: 2004-05-12 09:16

Sales and promotions are always the most frequent and effective weapons for business firms to make a big fortune, especially during holidays.

For China Mobile and China Unicom, the duopoly of mobile telecom operators, slashing telecommunications fees is definitely at the top of their efforts to lure more subscribers in May.

Some of the promotional tools used include free wireless services such as wireless date transmission, multi-media messaging, package wireless telecommunications services as well as handset subsidies.

"This kind of promotion shows that telecom operators have more say in deciding the prices based on market demand," said Chen Jinqiao, an official with the China Academy of Telecommunications Research under the Ministry of Information Industry.

Being the world's largest mobile telecommunications market, China will see fiercer competitions among domestic telecom operators this year, as all the participants are vowing to grab an increased market share, analysts say.

"The situation is inevitable as the government is to further relax controls with a whole range of competitions already formed in the sector," Chen said.

As there are so far no clear policies regarding adjustments on current telecommunications fees from the ministry, analysts believe further slashing prices will be one of the major ways telecom operators will consolidate their business.

Facing fiercer competition, China Mobile pledged last month to invest about 60 billion yuan (US$7.2 billion) to upgrade its networks, which would include replacing old equipment and network expansion.

Analysts believe heavy investment in equipment was made mainly due to lower telecommunication fees, as a result of price wars, which brought about fast-increasing numbers of subscribers.

According to regulators, the price for mobile telecommunication fees is set at 0.40 yuan (4.8 US cents) per minute for China Mobile's "GoTone" subscribers.

In practice, however, the telecommunications fee is currently priced at 0.20 yuan (2.4 US cents) per minute as telecom operators have undertaken various kinds of promotional activities.

For China Unicom, it is now sparing no effort in upgrading its CDMA network and hammering out more value-added wireless services to compete with its rival.

The company officially kicked off its new services branded "U Park," featuring multi-media messaging, digital photos, online games and online chatting mainly targeting young people.

"For mobile telecom operators, there is still room to cut down on telecommunications fees and the fees are sure to decline further this year," said Kan Kaili, a professor of the Beijing University of Post and Telecommunications.

"If based on the government-set telecommunications fees, the fee will definitely be slashed," agreed Chen.

Consumers have long been demanding one-way billing, but Chen said that many subscribers' expectations are much too high.

"The key point for one-way charges is to lower the current telecommunications fees instead of just adopting a new fee system," he said.

Technically, the one-way charge system is not as simple as merely cutting current telecommunications fees in half.

Exempting received calls may lead to an increase in telecommunications fees for making phone calls, he said.

Kan shares Chen's opinion, saying "it is more important to slash telecommunications fees instead of just changing the two-way charge system to a one-way charge system."

Chen said he doesn't rule out the possibility that the ministry will launch a one-way charge system for mobile telecommunications in the near future.

"The government-related sectors are studying and discussing the feasibility of one-way charges," Chen said.

"But as far as I know, there is no change to mobile telecommunications fee, right now," he said.

"We are not going to slash the mobile telecommunications fee right now," said Information Industry Minister Wang Xudong.

The price for telecommunications fees, set by the government, will remain unchanged at the moment, he stressed.

The maturity of technology and market demand are the decisive factors in determining the price, Wang said late last month at the Bo'ao Forum for Asia in Hainan.

"We see an obvious progress in this regard as the market is full of different kinds of promotions," he said.

Wang's remarks refuted speculation on the ministry further lowering mobile telecommunications fees as a result of increasing outcry from subscribers.

Some analysts predict there will be a change in the telecommunications fees system this year as the ministryhas already formed a special panel to adjust its supervision on telecommunications fees.

According to Wang, the ministry is working on related laws and regulations to build up legislative means to help cut down mobile telecommunications fees.

However, sources close to the ministry said that there is still much uncertainty.

Insiders believe that internal integration and adjustment this year will also be an effective way for telecom operators to become more competitive.

The quick expansion of "Little Smart" wireless phones will continue to be a catalyst for the decline of mobile telecommunications fees.

The "Little Smart", also called Xiaolingtong, is built onto the existing fixed-line network and lures users with low per-minute rates, one-way charges and cheap monthly fees.

The service is adopted by both China Telecom and China Netcom to compete with China Mobile and China Unicom, as the companies have no mobile licenses.

Figures from China Telecom indicate there were more than 20 million Xiaolingtong users by the end of last year.

The figure for China Netcom stood at 15 million.

Distinguished from other parts of the world, China's telecommunications industry maintained a high growth momentum last year.

Figures from the ministry showed that the country's telecom industry reached a revenue of 461 billion yuan (US$55.5 billion), up 13.9 per cent from the previous year.

Fixed asset investment last year reached 221.52 billion yuan (US$26.6 billion), up 8.6 per cent from a year earlier.

"The booming industry is likely to maintain its strong growth momentum this year," said Gao Shiji, deputy director of the National Development and Reform Commission's Institute of Economic Systems and Management.