National roaming fee to be cut in China

Charice Wang, Research Analyst

On 22 January 2007, two relevant regulatory agencies, the NDRC and MII, held a public consultation on the reduction of national roaming fees in China. The new price cap for national roaming charges could potentially be announced before the Chinese New Year.

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

We anticipate that over 500 million customers will benefit from the tariff reduction, particularly as the current inflation rate hits a decade high and thousands of end users travel between provinces over the Chinese New Year holiday.

As the only country to charge end users travelling between provinces for using mobile services on the same network, the debate is over the undisclosed cost of roaming on one network between provinces. Most costing information about roaming has not been revealed by operators to the public. Customers are hoping the second draft, which will give further cuts, will be successful, while operators prefer the first proposal with less price cuts. The key is for the regulators to publish the cost of related services, and they have announced that relevant information will probably be released in the future.

The new tariff reforms will further aggravate fixed-to-mobile substitution (FMS) in China. In December 2007, China Netcom and China Telecom, the two major fixed line operators, reported their landline subscribers had continued to fall, by 2.53 million and 1.48 million respectively. In contrast, the popularity of mobile services is rapidly increasing, especially in rural areas, with China Mobile announcing a gain of 6.6 million new customers in the same period. 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 charges.

Therefore, the lower roaming fee might speed up telecoms sector restructuring when the government considers the state-owned fixed operators' revenues and long-term development. 2008 will not be a quiet year for the Chinese telecoms sector.

Charice is a research analyst for the Regulation@Ovum advisory service, our leading regulatory advisory product with more than 40 clients worldwide.