Telecom firms expand IM services in China

Mobile operators are using instant messaging (IM) services to gain user loyalty and provide various additional telecom services.

With the expanded distribution of Internet applications, the IM market has emerged as the driving force behind the growth of telecom operators.

According to data released by the China Internet Network Information Center, the number of Internet users in China reached about 220 million as of June, with 70 percent using the IM service.

The development of the mobile Internet dramatically increased data services, while at the same time speeding up Voice-Over-Internet Protocol (VOIP) services.

It is projected that the Internet business model will take a larger share of the revenue model of telecom operators. With the increased use of the mobile Internet, IM service providers are rapidly advancing into mobile data, voice, and video telecom sectors.

IM services had a positive effect on securing customers, and improving the brand image of telecom operators.

Fetion, a new IM service released by China Mobile, enhanced user brand loyalty through its interactive interface and content. The service also attracted potential customers, created new revenues through Internet ads and additional services by encouraging subscribers to use IM more frequently.

China Unicom is also preparing to launch an IM service with various functions.

Acquisitions

Telecom operators have focused on developing IM services to retain existing customers while attracting new customers through integrated information platforms.

Tencent, which managed to secure a large number of subscribers, created revenues through online games, e-commerce, portal ads and additional services based on its QQ platform.

In 2006, Tencent sold its mobile IM service unit to China Mobile and decided to focus on its Internet IM service.

Tencent's mobile QQ platform and 7 million users were gradually transferred to China Mobile's Fetion platform, and mobile QQ was withdrawn from the market.

China Mobile successfully launched its own IM service by combining its 500 million users (70 percent of cell phone users in China), and Tencent's mobile IM service unit.

China Mobile emerged as the third-largest player in the Internet IM sector, overtaking MSN within two years of its launch by attracting most of the existing QQ subscribers with its Fetion service.

In July 2006, before the launch of Fetion, China Mobile recognized the importance of the mobile IM market. At the time, the mobile IM service market was dominated by Tencent's QQ, with Microsoft's MSN, TOM's Skype, Sina's UC and Yahoo's Messenger competing against each other.

China Mobile had the capability to expand as it had a definite advantage in the number of users, technology and infrastructure.

Latecomers

China Telecom is preparing to take on the IM market leader with the cooperation of market latecomers.

China Telecom launched an IM service, Tianyi Live, in cooperation with MSN. It is designed to transmit SMS between different networks and offline messages.

The service is expected to earn an advantage in the competition with Fetion by enhancing user loyalty and increasing market share in the IM market.

China Telecom wanted to differentiate Tianyi Live from other IM software. China Telecom improved the compatibility of Tianyi Live with other software programs by combining various services and applications.

Tianyi Live includes services such as I-Music, HD movies, TV programs, information on the economy and a "photo-print" option. It is designed for the 3G era, facilitating interactive communications between PCs and mobile phones.

China Telecom established a new IM model that is closely linked with telecom services through Tianyi Live and maintains service quality through a partnership with the Microsoft Windows Live Platform.

Strategic implications

China Telecom's Tianyi Live paved a new road in the Internet services sector. China Telecom concentrated on establishing an integrated information service platform between PCs and mobile equipment to secure an advantage in the 3G era.

Corporate customers of China Telecom laid the foundation for attracting individual subscribers. China Telecom plans to expand distribution of Tianyi Live through customized cell phones.

The company's IM strategy could possibly influence CDMA cell phone manufacturers. Korean and Japanese telecom operators also plan to expand services and will greatly influence the made-to-order production of cell phones.

The author is a researcher with Samsung Economic Research Institute (China). The views expressed here are his own.

(China Daily 12/05/2009 page2)