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ANALYSIS

Fresh competition looms over mainland's mobile services market

New entrants in the mainland mobile market are catching attention in the lead-up to service launches this month with flexible pricing plans

PUBLISHED : Tuesday, 10 June, 2014, 1:02am
UPDATED : Tuesday, 10 June, 2014, 1:02am

Beijing's plan to fast-track telecommunications industry reforms by allowing mainland private companies to provide domestic mobile services has started to spur competition in terms of wireless data plans.

A number of these so-called mobile virtual network operators (MVNOs) have recently announced preliminary mobile data price plans before their service launches this month.

"The MVNO plans that we've seen so far provide more flexibility than those currently offered by the three incumbent nationwide mobile network operators," Ricky Lai, an analyst at Guotai Junan International, said yesterday.

"For example, some MVNOs will allow their subscribers to make use of a month's unused data capacity the following month, which is a feature that the incumbent operators do not provide."

The Ministry of Industry and Information Technology issued MVNO licences in December and January that enabled mainland private companies to expand local 3G mobile voice and data services competition. Each operator is to offer service in specific locations under its brand name, while leasing network capacity from one or all three incumbent operators - China Mobile, China Unicom and China Telecom.

A Barclays report published last Friday showed that there are 26 MVNO licensees taking part in the government's two-year trial. These included subsidiaries of mainland e-commerce giant Alibaba Group, nationwide retailers Gome Electrical Appliances and Suning Appliance, and online shopping platform provider JD.com in which Tencent is a major shareholder.

Ali Telecom, the MVNO formed by Alibaba subsidiary HiChina, unveiled its price plan last week. Instead of a fixed monthly fee, the operator will charge based on data consumption. Users must spend a minimum of seven yuan (HK$8.80) a month, with voice calls and messages counted as data.

Local media reports said Ali Telecom may introduce a credit system in the future, allowing frequent customers of Alibaba's online shopping sites, Taobao Marketplace and Tmall.com to enjoy certain privileges like an amount of overdraft in monthly data consumption.

"As things stand, we maintain our view that MVNO trials should not materially disturb current competitive dynamics [in the mainland mobile market]," said Anand Ramachandran, lead author of the Barclays report and the firm's head of telecommunications, internet and media equity research for Asia, excluding Japan.

Ramachandran expected the mainland's incumbent mobile service providers to offer "competitive price plans compared with MVNOs" after recent rounds of price cuts.

In addition, the MVNOs are challenged by the lack of number portability on the mainland, he said. That means subscribers cannot keep their old numbers, but must get new ones with a "170" prefix.

Lai, meanwhile, expected China Mobile, China Unicom and China Telecom to continue leading the market in terms of 3G and 4G smartphone adoption based on the broad selection of models that each one offers to customers. All three incumbent mobile operators also serve as carrier-partner for the popular iPhone, which Apple is widely expected to upgrade in the second half of this year. China is Apple's second-largest market after the United States.

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