Making money, and enemies, from the Fetion attraction

By Li Weitao (China Daily )
Updated: 2007-06-06 09:54

By launching its own instant messaging (IM) service, China Mobile yesterday made its first foray into a lucrative market.

The bet is big: the cellular operator could profit a lot from its IM tool, known as Fetion, as long as the country's PC-based IM users go mobile.

Microsoft has signed up more than 9.5 million users for the MSN messenger service in China. The number of Tencent Holding Ltd's QQ IM users has swelled to over 140 million.

If this huge subscription base switches to mobile-Internet crossover IM tools such as Fetion, the opportunity could be huge.

Although Tencent and MSN are the front runners in the mobile IM sector, China Mobile still has an upper hand given its mobile phone subscription base of 320 million. With Fetion pre-installed in China Mobile's customized phones, its appeal is only likely to grow.

But the biggest advantage China Mobile enjoys is wireless industry dominance. In China, companies like Tencent, known as service providers (SPs), partner with operators to provide wireless value-added offerings such as ringtone downloads to customers under a revenue-sharing scheme.

In the past years, under a revenue-sharing model, China Mobile could work well with SPs as few of their offerings overlap.

But the Fetion launch could force them to compete head-to-head. And the worst scenario for SPs is China Mobile taking advantage of its dominance to put the squeeze on SPs.

In December, China Mobile announced that it was ceasing its partnership with Tencent and MSN in the IM offerings on its mobile platform. Tencent later agreed to interconnect its mobile QQ users with Fetion users.

In October, Tencent launched a lawsuit against Beijing-based MMIM, accusing the latter of "unilaterally" interconnecting its mobile IM service, called PICA, with QQ.

Interconnection benefits smaller players as it helps boost the subscription base and grow brand image. That's why MSN has asked for an interconnection between MSN messenger and QQ but has got no response.

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So Tencent's favor showed to China Mobile has raised industry concerns that the operator might exploit its dominance, rather, its monopoly.

But China Mobile's increasing clout in the wireless sector could also backfire. Its tightened supervision of independent WAP (wireless application protocol) websites has drawn much criticism as many viewed it as an excuse to develop its own mobile Web portal.

With China Mobile moving into many nascent markets in which its partners (SPs) have been operating, it needs to be careful not to trigger such backlashes.

And for regulators, that's when they might need to step in to ensure a monopoly is not abused and competition is fair.

(For more biz stories, please visit Industry Updates)