TELECOMS: China Mobile Charts End to Roaming Fees

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China Mobile charts roaming fee phase-out

Following signs earlier this year that they were resisting a call to end to domestic roaming fees, China’s big 3 wireless carriers are finally reversing course and bowing to pressure from the telecoms regulator to follow a practice already common in much of the world. But leading telco China Mobile (HKEx: 941; NYSE: CHL) is taking its time making the transition, saying it will gradually phase out such fees over the next 2 years. Smaller rival China Telecom (HKEx: 728; NYSE: CHA) appears to be moving more quickly, while the perpetually befuddled China Unicom (HKEx: 762; NYSE: CHU) has yet to state its policy on the issue.

The different approaches reflect the personalities of these 3 carriers, all acting under relatively new leadership installed over the last 3 years. China Mobile has emerged as the most conservative of the trio, aiming to protect its dominant position that has seen it control two-thirds of the market for the last decade. China Telecom is showing signs of a more aggressive tack under its new leader named earlier this year, while Unicom always seems to be a state of management turmoil.

The first signals on the roaming issue came out in April, when reports emerged that the Ministry of Industry and Information Technology (MIIT) was pushing the 3 carriers to end national roaming fees. The carriers appeared to be banding together to resist such a move, giving a number of mostly nonsensical reasons why such fees were still necessary. (previous post)

Now China Mobile chief Li Yue has finally come out and given a road map for his company’s move to eliminate domestic roaming charges, saying such fees will be gradually phased out over the next 2 years. (Chinese article) In a news briefing to discuss his company’s latest financial results, Li revealed that China Mobile stopped offering plans that included domestic roaming back in July, adding that all such plans will be eliminated by year end.

China Mobile revealed last week that mobile data fees have surged in the last 2 years with its roll-out of 4G services, and have become the company’s signal largest single revenue source. (previous post) By comparison, traditional voice services that include roaming fees now account for about 37 percent of China Mobile’s revenue.

Bowing to Pressure

Li’s approach looks fairly logical, but also somewhat slow and defiant in the face of the MIIT’s pressure to end domestic roaming fees. By phasing out the fees over a 2 year period, China Mobile will avoid a shock of suddenly losing this source of income all at once. By the end of that 2 years, it’s also probable that revenue from data services will grow sufficiently to more than offset the loss of revenue from domestic roaming fees.

China Telecom has taken a more aggressive tack on the issue, and has previously said it will also phase out domestic roaming fees and strongly promote simplified packages that including voice, national messaging and data services all for a single monthly fee. That strategy was detailed in July by the company’s new chief Yang Jie, as the company aggressively promotes its own 4G services launched last year.

China Unicom has yet to announce its roaming fees strategy, which seems typical of a company which has been a state of management disarray for much of the last decade. A media report on the subject points out that Unicom’s Guangdong subsidiary already bundles national roaming together with many of its 3G and 4G packages.

At the end of the day, it’s good to see the Chinese carriers are finally taking a step that they should have done 2 or 3 years ago, despite their earlier resistance to such a move. Obviously no one ever wants to give up a dependable revenue source like roaming fees. But such a move will allow the companies to focus on developing their data services, which are clearly the big future breadwinner in mobile communications.

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