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Mobile phone fees could fall even further

By Li Weitao (China Daily)
Updated: 2006-05-31 10:13

And all of its GSM and CDMA users can choose a package under which they can pay 16 yuan (US$2) for 1,000 minutes of calls, both incoming and outgoing.

People in Beijing have been paying the highest mobile fees in the country for years.
Despite the hefty charges, mobile phones usage is extensive.

By the end of April, Beijing had 15.11 million mobile phone subscribers.

And in the first three months of this year, mobile phone users in Beijing made and received 7.43 billion minutes of local mobile calls, an increase of 26.7 per cent year on year.

Even with further price cuts, the increasing minutes of use for mobile phones in the capital will help offset the negative impact on China Mobile's revenue growth, said Zhang Dongming, research director of telecom consultancy BDA (China) Ltd.

"Thanks to its well-established monopoly, China Mobile will still have much flexibility for more price cuts," she said.

And these cuts will help China Mobile woo more price-sensitive low-end users.
That would apply pressure to China Unicom, which has been focusing on the low-end market.

Currently Chinese regulators allow Unicom to charge 10 per cent less for mobile fees than China Mobile as part of efforts to support the smaller Unicom.

The price cuts will also help China Mobile snatch up users from the Xiaolingtong (PHS) service offered by fixed-line carriers China Telecom and China Netcom. This is a limited mobile phone service.

The PHS service practices a caller-pay scheme and charges a much lower monthly subscription fee.

The service has been a formidable threat to mobile operators' low-end subscription base.

Unconfirmed media reports said China Netcom, which offers a PHS service in Beijing, is developing aggressive promotions and new pricing schemes to defend itself against China Mobile and Unicom.

But even after Beijing Mobile's price cuts, mobile fees in the capital remain the highest in the country.

In many provinces, a de facto one-way charging system is practiced, which has help undermine PHS's competitiveness.

But a caller-pay scheme is unlikely to be introduced in Beijing, said Kevin Qiu, an analyst with Beijing-based research house Analysys International.

"The Beijing market is a major revenue contributor and Beijing Mobile and Beijing Unicom have been very careful not to trigger large-scale price wars."

Promotions announced by Beijing Mobile early in May are a selection of package deals.
And there are several limitations. For instance, a user can choose only one package.

"That is a smart pricing strategy, targeting specific user groups. But you've got the wrong impression if you think everyone will benefit from it," Qiu said.

And such promotions do not include roaming fees, which are the frequent target of complaints.

Typically, China Mobile users pay 0.6 yuan per minute for a roaming service.
Operators are unwilling to introduce either complete price cuts or one-way charging, said Qiu.

Complete price cuts, instead of package deals, will potentially undermine China Mobile and Unicom's sub-brands targeting different user groups, he noted.

For instance, China Mobile has a youth-focused mobile brand called "M-Zone." Within "M-Zone" network subscribers pay half the standard mobile fees.

Even if operators are willing to launch one-way charging, the introduction of the scheme will still face a lot of hurdles, such as the complicated inter-connect settlement issue.

And previous rumours of one-way charging have sparked a sell-off of stocks belonging to China Mobile and China Unicom.

"Regulators will remain very prudent and the caller-pay scheme will remain a far-off dream," said Zhang.