Grappling with roaming-fee cuts
By Amy Lam (HK Edition)
Updated: 2008-02-15 07:14

The mainland’s only two mobile-phone service providers will try to increase usage to offset any negative financial impacts caused by the new roaming-fee regulations.

China Mobile and China Unicom made the announcement yesterday.

The new regulations will go into effect March 1 and require the duo to slash their roaming charges by 60 percent.

Analysts, however, don’t see the regulations causing much trouble, as roaming accounts for less than 10 percent of the companies’ revenues.

Moreover, a rate cut could help them lure users from fixed-line operators such as China Telecom and China Netcom.

"The new policy will have some impact on China Mobile," a spokesperson from the country’s largest mobile-service provider told China Daily yesterday. "But the company can maximize shareholders’ interest by implementing flexible pricing strategies, which are expected to boost usages."

China Unicom echoed China Mobile’s sentiments by admitting that "there must be some impact," according to a statement sent to China Daily.

But it also said it could "further strengthen sales and promotion while improving management and services to increase the number of customers".

Mobile phone users on the mainland will be charged 0.6 yuan per minute for making calls and 0.4 yuan for receiving calls outside their local service area. Those numbers are down from the current 0.8 yuan and 0.6 yuan, according to regulations released by the Ministry of Information Industry and the National Development and Reform Commission on Wednesday.

China Mobile, according to one analyst, will likely benefit from the regulations.

"The rate cut is music to (China Mobile’s) ears but noise to others’" said Eric Wen, an analyst for BNP Paribas.

"A lower roaming fee means consumers may switch from fixed lines to mobile phones when they make long-distant calls. So, China Mobile will stand to benefit, further pushing fixed-line operators (such as China Telecom and China Netcom) to the sidelines," he said.

But China Unicom may not be able to benefit as much in the same way, because the company has almost reached its full capacity amid fierce competition with China Mobile, Wen added.

A JPMorgan report also downplayed the impact of the new regulations, saying that roaming fees only account for a single-digit percentage of China Mobile’s revenue, and about 6 to 7 percent for China Unicom.

China Mobile’s promotional plan for roaming customers in previous years - at prices lower than the new charges - have already attracted frequent users, the report said.

The mainland is now the world’s largest mobile market with 539 million subscribers.

And both service providers will continue battling to make their stakes there larger.

(HK Edition 02/15/2008 page2