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Ministry battles telecom price wars

By Chen Zhiming (China Daily)
Updated: 2004-07-03 10:12

To prevent ferocious price wars among telecom operators, the Ministry of Information Industry (MII) reiterated on Friday it would step up efforts to enhance supervision of the telecom industry.

"We have just issued a circular to telecom operators, urging them to enhance their management to avoid price wars," said MII's spokesman Wang Lijian in an interview on Friday.

According to the circular released on June 25, telecom operators are required to inspect all of their subsidiaries to prevent price wars.

Meanwhile, they are to submit the report of their self-inspections to the MII after the process is done till December 1.

Wang declined to release further information about the circular.

Dai Chunrong, an analyst from China Securities, believed the release of the circular echoed MII Minister Wang Xudong's remark in January that the country is to further standardize the market and offer a more open, efficient and fair telecommunications sector for all participants.

"It is quite a strong signal for all telecom operators to phase out malpractice," she said.

Telecommunications fees were originally set by the telecom regulator - MII. But early this year, the MII said it is to gradually loosen its control over telecommunication fees this year to further bolster the development of the country's communications industry.

As a result, almost all telecom operators have turned to slashing telecommunications prices to grab a larger market share.

The major telecom operators involved in competition are China Mobile, China Unicom, China Telecom and China Netcom.

To further slash prices is likely to be one of the most competitive ways for telecom operators to attract more customers, Dai said.

"Part of the reason is there is still room for mobile telecommunications to cut down their prices," she added.

In another development, Dai pointed out that many of the telecom operators are listed companies and are facing great pressure from their investors, who lock their eyes on profits.

"Without any other effective means to gain profits, to attract more subscribers with lower telecommunications fee may be the most effective way to remain stable," she said.

"However, telecom operators should turn to developing new business and services to consolidate their market shares as well as luring new subscribers," Dai said.

She believes new services such as IP-based service and wireless data services will be strategically important for telecom operators to maintain growth in the market.

Chen Jinqiao, director of the China Academy of Telecommunications Research under the MII, believes competition in the domestic telecom market has already taken shape.

"Operators should turn to services, network upgrades as well as innovations to seek new growth areas," he said.

MII figures indicated that China's mobile phone subscribers had topped 300 million by the end of May.

Business revenue from the telecom industry reached 210.36 billion yuan (US$25.3 billion) in the first five months of the year, representing a growth of 13.4 per cent from the same period of last year.

At the same time, fixed-line telephone users reached 290 million with 192 million urban users and the remaining in rural areas.

"Nevertheless, the industry has a thirst for effective supervision," Chen said.

"Laws and regulations will be among the top concerns for the industry," he suggested.

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