Jego suspension: China Mobile's latest mixed signal

China Mobile's reversal on its new Jego service is its latest mixed signal on a key strategic issue, reflecting dysfunction within the company

Doug Young

Published: 11:42am, 24 Jun 2013

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I previously welcomed the installment of a new generation of leaders at China Mobile (0941.HK; NYSE: CHL) about a year ago, but a steady series of mixed signals since then have me wondering if these new executives may be just as confused as their predecessor, former Chairman Wang Jianzhou. Since taking the helm of the world's biggest telco, the new executives, led by new Chairman Xi Guohua, have made a number of moves that seem to reflect a company whose head remains in a haze. The latest of those has seen China Mobile just announce that it's suspending its Skype-like Jego mobile messaging service just weeks after its launch.

Before we go any further, it's helpful to review the twisted story that led to Jego's launch less than a month ago. In many ways, that story reflects the current state of dysfunction that increasingly looks like a central part of China Mobile's emerging corporate culture under its new leaders.

The story began late last year, when China Mobile executives began publicly complaining about WeChat, the popular mobile instant messaging product developed by Chinese Internet giant Tencent (0700.HK). China Mobile complained that it was losing major business for its traditional short messaging (SMS) service to WeChat, which let mobile users send messages for free using the mobile Internet.

A bitter war of words broke out after that, with China Mobile pressuring Tencent to start charging money for WeChat use. China Mobile wanted to get some of that money from Tencent under a revenue sharing agreement, even though Tencent repeatedly insisted the service would remain free.

That conflict finally receded earlier this year when China Mobile finally stopped complaining and did what it should have done all along - try to develop its own rival products. One of its major moves in that direction was its launch of Jego early this month. Now media are reporting that China Mobile has announced it is suspending new registrations for Jego indefinitely.

The reasons given for the suspension were vague, saying Jego was still in its "optimisation phase". A source at China Mobile said the move may have been caused by differing opinions within the company on the future direction of Jego. The source said some China Mobile executives may have feared that Jego would steal even more business from the company's SMS and other services.

This strange reversal for such a highly hyped product seems to be consistent with a growing trend for mixed signals from China Mobile under its new management. In another mixed signal, the company announced in April it had applied for a mobile license in Myanmar with European giant Vodafone (London: VOD). But then just two months later it abruptly announced it was dropping the bid for largely unexplained reasons.

China Mobile has also sent mixed signals on its neglected 3G network, based on a homegrown technology called TD-SCDMA. The company did little to promote the problematic network in the first two years after its launch, but then suddenly began to promote it strongly late last year. At the same time, however, it was also sending strong signals that it could quickly abandon that campaign if it succeeded in winning a license to launch 4G service later this year.

These mixed signals could simply reflect the fact that Xi and his new team of top managers are still consolidating their positions at the company, and are still in the process of deciding their stance on many key strategic issues. But if this kind of indecision and policy reversals continue much longer, it could become a troubling sign for the company just as it rolls out its highly anticipated 4G service later this year.

Bottom line: China Mobile's reversal on its new Jego service is its latest mixed signal on a key strategic issue, reflecting dysfunction within the company.

To read more commentaries from Doug Young, visit youngchinabiz.com

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