Cutting national roaming charges

Charice Wang/Ovum
31 Jan 2008

On 22 January 2007, two relevant regulatory agencies, NDRC and MII, held a public consultation on reduction of national roaming fee. The new price cap for national roaming charges possibly will come out before Chinese New Year.

It is one further step of Chinese tariff reforms, following gradual cancellation on receiving party pay mechanism, regulating mobile price packages. In comparison with current roaming charges, roaming fees will fall by 13.3% and 80% under the two proposed draft plans according to the official statistics.

We see over 500 million customers will benefit from the tariff reduction, in particular current inflation rate hits decade-high and thousands of end users will travel between provinces over Chinese New Year holidays.

Nevertheless, as the only country to charge end-user travelling between provinces for mobile services on the same network, the debate is on the unrevealed cost of roaming in one network between provinces. As most of the roaming costing information has not been disclosed by operators to the public, customers hope a further cut than the second plan and operators prefer to the first proposal with less cut.

The key is that the regulators publish the cost of related services and they have announced that relevant information will probably be released in the future.

The new tariff shall further aggravate fixed-to-mobile substitution (FMS) in China. In December 2007, China Netcom and China Telecom, the two major fixed-line operators, reported declines in their landline subscribers by 2.53 million and 1.48 million respectively. They are faced with the rapidly-increasing popularity of mobile services, especially in the rural areas, resulting in China Mobile clocking up huge gains in customer adds and absorbing most of the industry revenue growth.

The imbalance of competition between mobile and fixed operators will be enlarged when more end users are using mobile services as a result of lower roaming charge.

Therefore, the lower roaming fee might speed up telecom sector restructuring as the government considers the long-term development of the fixed telecom operators. The year of 2008 will not be a quiet year for China telecom sector.

Charice Wang, Research Analyst

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