Lower roaming charges to lift mobile earnings

PUBLISHED : Tuesday, 08 January, 2008, 12:00am
UPDATED : Tuesday, 08 January, 2008, 12:00am

Beijing's plan to cut mobile-telephone roaming charges is expected to boost revenue for China Mobile and China Unicom as customers find it more cost effective to use their handsets when travelling.

China Mobile subsidiary Shanghai Mobile last week launched a new domestic roaming package even before the government announced it would review the tariff. Users paying a monthly tariff of one yuan can receive calls at 30 fen per minute when travelling outside Shanghai, a reduction of 50 per cent.

Users can also make calls for between 39 fen and 49 fen per minute while roaming by dialling the prefix 12593.

The special tariff represents a 76 per cent reduction for domestic roaming calls based on the standard rate of 1.3 yuan per minute, which includes a 60 fen per minute domestic roaming charge and a 70 fen per minute long-distance charge.

Under the existing pricing system, users must pay domestic roaming charges when they travel outside their registered area. Customers have long complained that such tariffs are too high.

Beijing will hold a hearing later this month seeking public opinion on roaming charges, which is expected to lead to a fall in the fees this year.

'The falling trend in mobile tariffs no doubt benefits China Mobile as lower tariffs encourage users to make more phone calls,' said Daiwa Securities analyst Marvin Lo.

Mobile service charges had been falling since mid-2006, but it had not hurt average revenue per user, a key measure of sales, Mr Lo said.

'This indicates that the fall in mobile tariffs will generate more revenue for China Mobile,' Mr Lo said. 'The trend will accelerate as more users make local long-distance calls through mobile phones rather than fixed-line phones.'

He added that domestic roaming charges accounted for less than 10 per cent of mobile operator's total revenue. According to China Mobile's earnings for the six months to June last year, voice traffic rose 20 per cent while average per minute revenue dropped 19 per cent.

China International Capital Corp forecast that mobile tariffs charged by China Mobile and China Unicom would fall by 12 per cent and 11 per cent, respectively, this year.