In 1987 the mobile telecommunication industry got its commercial start in China when the government of Guangdong made 100 cell phones available for sale.
State giant China Mobile (then known as China Telecom) developed its mobile network quickly in the south and east of the country, keeping fees relatively low. To finance its far-flung services in western China – where traffic was much lower – it needed to charge more. But many customers there dodged higher fees by registering their accounts in cities such as Guangzhou and Shanghai.
A solution was derived to thwart this practice and give the telcos more incentive to invest in the poorer central and western regions: the State Council introduced inter-provincial roaming fees (at Rmb0.6 per minute) and it allowed carriers to charge more for calls between provinces.
That has made China one of the few countries with domestic “long-distance” levies. Mobile phone users, notably businesspeople who make a lot of voice calls, have been hit with higher bills, while extra fees for data roaming are also demanded if smartphones are used out of province.
Most of these levies were consigned to the trash heap this month as China Mobile, China Unicom and China Telecom all announced plans to eliminate domestic roaming fees. The move came after Chinese Premier Li Keqiang said that he would continue to press them to lower their fees and upgrade their network quality – an announcement that drew the most enthusiastic round of applause from lawmakers when he made it at this month’s National People’s Congress (see WiC358). The telcos have also been told to spur Belt and Road initiatives by cutting international long-distance tariffs.
21CN Business Herald reports that it’s the fifth time that Li has taken aim at the carriers in public, telling them to put national goals for economic development ahead of their commercial interests.
The response was rapid. China Mobile announced in a statement that it will cancel roaming tariffs from October 1. Internet access fees for small and medium-sized enterprises will be reduced and it has promised lower tariffs for overseas calls to 64 countries in the Belt and Road blueprint.
China Unicom had already been offering roaming-free packages to its newer customers, but it too will ditch the fees entirely this year, estimating that the changes will translate into Rmb1.6 billion ($232.2 million) in lost revenue per quarter.
Li’s measure was not best timed for Unicom, which last week announced a 94% slump in annual profit to Rmb625 million, blaming higher operating expenses.
China Mobile this week reported some of its slowest profit growth for years, with net income increasing 0.2% to Rmb109 billion for the year.
It said the new pricing regime would cost it Rmb4 billion a quarter.
However, as ThePaper.cn has reported, China’s ‘WeChat generation’ has hardly been wowed by the commitment to cut call costs. Why? Mobile messaging apps such as Tencent’s WeChat are ubiquitous and fewer young people use their phones to make voice calls or send text messages. “In the age of 4G, we almost don’t need roaming services,” one user wrote on Sina Weibo. “Priority should be given to boosting internet speed and reducing mobile data charges.”
In fact, wireless data traffic featured as China Mobile’s largest revenue stream for the first time in 2016, outstripping voice and text messages combined. Mobile data revenues for the three state telcos surged from Rmb44 billion in 2010 to Rmb433 billion last year, while income from phone calls fell from Rmb400 billion to Rmb180 billion over the same period.
That means that the three carriers will be desperate to defend their sales of data traffic, especially as they build out their 5G networks.
But don’t be too surprised if Li Keqiang tells them to rethink their tariffs there as well.
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