A fierce price battle has severely eroded their margins. The industry sheriff, the Ministry of Information Industry (MII), is unwilling to intervene. And the two dominant providers of mobile phone services - China Mobile and China Unicom - are bickering over who fired the first shot.
Late last month, China Mobile launched a promotion for pre-paid service users in Guangzhou, waiving fees for incoming calls. The plan charges Guangzhou users less than 20 fen (19 HK cents) per minute for outgoing calls within the city - half of what it should levy under rules set by the MII.
To hear chairman Wang Xiaochu tell it, China Mobile was just responding to price cuts from rival China Unicom, which had lowered tariffs by more than 30 per cent.
But China Unicom chairman and chief executive Wang Jianzhou said the company had been forced to respond to stiffening competition. 'We really don't want to see a price war. A price war benefits nobody but hurts all of us,' he said.
While it might not be clear which company started the price battle, what is clear is the once highly regulated telecommunications industry has become more rough-and-tumble over the past 18 months, with carriers testing the patience of the MII as they fire shots at one another. Under industry rules, plans whereby only the calling party pays (CPP) - like the one China Mobile offers to pre-paid users in Guangzhou - are technically off-limits.
From the regulator's point of view, however, the MII will turn a blind eye to CPP schemes as long as carriers limit the offers to 'promotion plans' with limited geographical areas and time frames. Such tolerance could embolden carriers to push the limits further.