China telcos told to cut subsidy spend: report

Dylan Bushell-Embling
10 Jul 2014

Chinese regulators have reportedly ordered the nation's three state-owned operators to significantly cut back on smartphone subsidies and other marketing expenses.

The State-owned Assets Supervision and Administration Commission has instructed the operators to cut spending by a combined 40 billion yuan ($6.45 billion) over the next three years, sources toldBloomberg.

The cutbacks were said to have been requested after the Commission came to the decision that operators had spent too much money subsidizing and advertising devices including the iPhone.

Analysts quoted for the report believe that the order – if it has been issued – would have the largest impact on the high-end smartphone segment. Domestic low-cost smartphone vendors could instead benefit, as it would raise the shelf price of high-end devices.

But the rumored order may not have much impact on the mobile operators themselves, as it is likely they would have been looking to shave subsidy spending with or without pressure from the Commission, one analyst said.

With the operators footing the bill for wide-scale 4G rollouts and struggling with declining SMS revenue due to OTT substitution, this argument makes sense.

It is not unprecedented in APAC for regulators to intervene when they fear operators are offering excessive handset subsidies. South Korea's mobile operators and regulators have been sparring over the issue for years.

Earlier this year, all three operators were barred from signing up new subscribers for at least 45 days as part of the subsidy stand-off.

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