China Mobile chief warns unlimited data plans not ‘healthy’ for industry development
Unlimited data plans may increase revenue in the short run, but are ultimately unsustainable for the industry, China Mobile chief executive Li Yue said on Wednesday.
Li told reporters after the company’s annual general meeting that unlimited data plans without a cap on how much data can be used may be profitable for operators today, but will ultimately cause losses for the industry in the future.
His comments came after China Telecom and smartphone maker Xiaomi announced an unlimited data package for Xiaomi users earlier this month, much to the delight of Chinese netizens. China Mobile has also pushed out similar data plans, but data speeds are throttled once users use over 12 or 20 gigabytes of data per month depending on their subscription plans.
“We’ve done our own experiments for mobile broadband, a user could use up to 40 gigabytes of data a month if you don’t [cap the amount of data],” Li said. “If data plans are truly unlimited, users may be content with using five or six gigabytes today, but next year they could use 15 or 16 gigabytes, and the year after maybe even 35 gigabytes.”
“At that point, if it’s still the same data plan at the same price, [companies] will require a lot of resources to support this plan. The industry won’t be able to develop in a healthy manner.”
China Mobile also acknowledged that the launch of unlimited data plans by its competitors could mean a drop in its users as they switch operators, but emphasised that the company is being cautious when it comes to such data plans. The company is exploring “sustainable pricing systems” for data plans, it said.
China Mobile, China Unicom and China Telecom have been pushing out bigger data plans in line with Premier Li Keqiang’s call for the Chinese mobile operators to “increase speed, drop prices” in an effort to push the telecommunications and internet industry forward. The companies will also do away with roaming charges and inter-city calling charges by October 1.
China Mobile previously stated that it expected a revenue decrease of 7 billion yuan (US$1 billion) this year due to the tariff cuts and an even larger revenue drop of 19 billion next year. China Mobile chairman Shang Bing remained optimistic, stating that the drop in prices would encourage user growth and increase data consumption by users, thus benefiting the company in the long run.
When asked by reporters if China Mobile is concerned that Tencent’s user base for WeChat has surpassed its mobile subscribers, Li said that the two companies had different business models as Tencent’s 937 million users are using the app for free, but China Mobile’s over 800 million users are paying a subscription fee each month. He added that the company is open to working with internet companies, as the growth of these companies and its services will also boost data traffic and is beneficial to mobile operators.