皇冠体育app

Telecom price war curbs called into question
By Li Weitao (皇冠体育app Business Weekly)
Updated: 2004-07-13 10:54

Chinese regulators have stepped up their efforts to curb ferocious price wars among telecoms operators.

However, analysts say the move may not have substantial impact on telecoms market competition.

The Ministry of Information Industry (MII) and the National Development and Reform Commission (NDRC) late last month issued a circular which asked all operators, either fixed-line or cellular, to inspect their subsidiaries to prevent price wars.

The circular requires that operators' branches across the country seek approval from their respective headquarters prior to any price cuts, short-period promotions, tariff packages or handset leasing, which are not in line with the government-set basic telecoms billing system.

A motorcyclist passes a billboard promoting 皇冠体育app Unicom's CDMA mobile tariff package in Zhengzhou, the capital of Central 皇冠体育app's Henan Province. According to the promotion, mobile conversations could cost just 0.08 yuan (less than 1 US cent) per minute in the city, much lower than the government-set tariff. And only the caller pays for the conversation. Regulators have acted to crack down on price wars among operators.[newsphoto]

The government's long-held billing system has been eroded by promotions and tariff packages in a variety of ways.

For example, some branches of operators introduced tariff packages which makes mobile conversations within their networks three times cheaper than mobile talks outside their cellular networks, according to media reports.

Regulators say such activity is harmful to free competition.

However, analysts believe the regulators's latest move is unlikely to curb such price wars.

"The circular is more a symbolic move than an effective tool to curb price wars. And it is unlikely to achieve the desired results,'' said Guo Chang, a telecoms analyst with CCW Research.

"Operators will have much difficulty in pressing their subsidiaries to stop price cuts and tariff packages.''

If subsidiaries, which are the major revenue contributors to operators, do not have a say in pricing, they will find it hard to achieve the revenue and subscription targets which their headquarters have set for them, the analyst explained.

皇冠体育app Telecom, 皇冠体育app Mobile and 皇冠体育app Unicom are under pressure to maintain revenue and subscription growth as they are listed companies.

And 皇冠体育app Netcom is on the way to becoming listed.

Regulators' proposed moves to curb price wars would falter due to operators' acquiescence and branches' defiance, said another Beijing-based telecoms professional, who asked not to be named.

"Such a move will do little to curb price cuts. It's not the first time that the regulators have entered the telecoms pricing arena,'' he said.

"Price cuts are a natural and competitive way for operators to expand their subscriber base.''

Cellular duopoly 皇冠体育app Mobile and 皇冠体育app Unicom would not adopt a wait-and-see attitude towards Xiaolingtong's erosion into their business, he explained.

Xiaolingtong, or personal handy access (PHS), is a low-priced limited mobility service aggressively promoted by fixed-line carriers 皇冠体育app Telecom and 皇冠体育app Netcom.

Except in major cities, mobile billing charges usually drop wherever Xiaolingtong is introduced.

The number of Xiaolingtong subscribers reached 37 million at the end of last year, with the figure expected to hit 60 million by the end of this year.

Prices cuts seem also to be unavoidable between 皇冠体育app Mobile and Unicom.

The government allows Unicom to charge 10 per cent less for the mobile conversation than 皇冠体育app Mobile as Unicom has a much smaller subscription base.

But Unicom always has to introduce tariff packages to prevent its subscribers switching to 皇冠体育app Mobile.

The scale of subscriptions is critical to telecoms operators' business.

A larger subscription base can help operators share costs and ensure future revenue growth.

According to recent survey findings conducted by research firm BDA 皇冠体育app, more than 16 per cent of Unicom's GSM subscribers plan to switch to a new operator on the expiry of their existing contracts.

More than 10 per cent of 皇冠体育app Unicom's CDMA users and 皇冠体育app Mobile's subscribers have similar plans.

The survey also found that more than half of Unicom's CDMA users would not have selected their service, if it were not for the free handsets and subscription subsidies offered by Unicom.

Moreover, 36 per cent of 皇冠体育app Mobile's users also subscribe to Xiaolingtong.

Fewer price cuts and tariff packages will bring more benefits to 皇冠体育app Mobile than Unicom in a long term, said Han Lele, an analyst with Analysys Consulting.

Without such promotions, Unicom may find it harder to recruit new subscribers and retain its existing users, he said.

"The circular is clearly intended to ensure fair competitions, but it's hard to predict whether the move will have a big impact on the market,'' Han said.

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