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China's mobile market is more competitive than ever, thanks to the growing number of mobile applications. But mobile carriers and application developers are increasingly at odds on how to monetize the growth. One particular mobile app may even be threatening the bread and butter of traditional telcos.
WeChat, the two-year-old mobile application, with its low cost, instant transfer, and easy connection, is fast becoming a favourite for China's younger set. WeChat uses wireless connection to transfer voices, texts, and even images, mostly free of charge. But the application's exploding popularity has chipped away at the revenues of traditional telco carriers, that's why they're calling for levies on instant messaging applications like WeChat.
Xi Guohua, chairman of China Mobile Ltd, said, "Instant messaging is built on traditional carriers' networks. This is without question. The model is not sustainable if you don't charge for data volume or anything else. We are still studying how to charge. There is no free lunch."
Xi's comment rattled the market, as China Mobile has more than 600 million users. Soon after however, China Mobile denied reports of its negotiations to charge fees with Tencent, the owner of WeChat and China's largest internet firm. Tencent says the application doesn't compete with traditional carriers on phone calls and text messaging.
WeChat's Product Director at Tencent, Zeng Ming, said, "Tencent does have constant talks and idea exchanges with carriers. But so far we don't have any decision to charge fees to WeChat."
Zeng also noted that the rise in WeChat use has boosted revenue for the carriers, as they charge fees for data and related services. Though both sides are trying to ease the tension, their conflict of interests is clear.
Since its lauch in late 2011, WeChat has registered 300 million users, making it the second largest carrier by customer base. Meanwhile, the amount of text messages sent by cellphones only edged up 2.1 percent last year, the slowest rise in four years.