Caller-pay system for mainland mobiles on hold

PUBLISHED : Wednesday, 03 October, 2001, 12:00am
UPDATED : Wednesday, 03 October, 2001, 12:00am

Beijing is not expected to agree to the implementation of a calling-party-pays (CPP) billing system for mobile telephones as it would reduce operator revenue.

'This year, CPP will not be implemented,' said an unnamed industry executive. He also said it would be 'very difficult' to implement the system next year.

Investors have expressed concern about potential declines in industry revenue, despite expectations that any losses from the new billing system would be partially offset by an increase in subscribers.

News of the billing system's possible implementation caused China Mobile's and China Unicom's share prices to fall in August.

The executive said changing the tariff system while the industry was in a high-growth stage would result in business uncertainty.

He said that most countries which had the CPP system had done so early on in the development of their mobile-phone industry.

'CPP is not just about tariff cuts,' he said.

'It . . . should be seen as a wider adjustment of the telecoms tariff system which also involves fixed-line operators [there are a lot of fixed-line-to-mobile calls].'

Under the present system, both callers and receivers are charged. However, under a one-way CPP system, only the calling party pays, reducing operators' revenue by half for each call.

The change to the billing system is being considered by Beijing to increase the penetration of mobile-phone services in China.

Market penetration was just below 10 per cent at the end of August, with 125.77 million subscribers.

'China already has one of the world's cheapest mobile-phone rates, so I think the industry will grow rapidly without [having to] implement CPP,' the executive said.

However, investors are primarily concerned about the falling average revenue per user (ARPU) and mounting competition within the industry.

Investors last month dumped shares in the leading mobile-phone players after operators reported worse-than-expected declines in ARPU.

China Mobile, with more than 70 per cent of the market, has seen its market share being eaten into by rival China Unicom, which has been allowed by Beijing to offer tariffs that are up to 20 per cent cheaper.

Faced with this pressure, China Mobile tested the market in July by offering CPP tariffs in a city in the Shandong province. China Unicom responded by offering a similar service in the same area.

The executive said he believed a 'semi-CPP' billing system would be a more likely option for the sector.

This will allow operators a cut of fixed-line-to-mobile revenue which will increase after CPP is implemented.