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Mainland mobile services to be cheaper

China Unicom

Caller-pays policy to be imposed on operators next month, says source

Beijing is set to impose a caller-pays policy for its two mobile telephone operators, according to a source close to the Ministry of Information Industry, the telecoms regulator.

The policy would allow the mainland's more than 450 million mobile phone users to enjoy cheaper services from as early as next month.

Now when a mobile call is made on the mainland both the caller and the receiver must pay.

The source said the decision to adopt the caller-pays approach had already been made. 'The new policy has been kept secret by both the regulator and the mobile operators,' he said.

Neither of the mainland's two mobile operators, China Mobile and China Unicom, were available for comment yesterday. It was not clear whether they would implement the policy immediately from January 1 or phase it in.

Two-way billing has been the norm since mobile phone services debuted on the mainland. But Beijing has been flagging its intention to move to one-way billing for 10 years. The move will bring the mainland into line with most of the rest of the world, including Europe, Japan and India. Carriers in the United States, Canada and Hong Kong still use the two-way model.

Regulators adopted the two-way billing model when China Mobile and China Unicom were set up in the 1990s because the companies needed extra revenue to support the construction of nationwide networks. The system continued to prevent price wars that might undermine their financial health. Now, with most of the big spending behind them and user numbers growing rapidly, policymakers and consumers argue the companies can afford to lower rates.

Investors in the companies, both components of Hong Kong's blue-chip Hang Seng Index, have reacted skittishly when the idea of one-way billing has arisen in the past. The companies stand to lose revenue, at least initially, after the change, although there are no official estimates of how much would be lost.

In 2000, when a reported move to one-way billing caused shares of China Mobile and China Unicom to plunge, analysts estimated the change would cut both firms' revenues by about 20 per cent.

The change is expected to have the biggest impact in big cities where, because of the wider profit margins and larger user numbers involved, the two operators have adhered rigorously to the two-way billing system. In some smaller cities the operators have already launched discount packages that virtually amount to one-way billing.

China Mobile and China Unicom have thrived under the current system. Their average revenue per user, a key gauge of profitability, was 71.3 yuan per month in the first half of this year, compared with 64.4 yuan for fixed-line operators, the Ministry of Information Industry said. And the gap is widening.

The new policy could cause a further decline in revenues of fixed-line operators. The two biggest, China Telecom and China Netcom, fear the impact of cheaper mobile services on their personal handyphone system, a geographically limited service launched to compete with the mobile operators.

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