Experts are predicting further price cuts after China's largest mobile operator, China Mobile, announced lower call charges for Beijing subscribers Monday.

 

"The investment for mobile operators is at the early stage of network construction and the relative cost drops as the number of subscribers grows," said Xi Mingyu, supervisor of telecoms consulting department with the China Center for Information Industry Development (CCID).

 

China Mobile users can now call other Beijing numbers for 0.2 yuan per minute and answer calls for 0.02 yuan per minute.

 

Before the adjustment, the price for calling and answering was 0.4 yuan.

 

Subscribers expected that the monthly charge for the Go-Tone service, a service of China Mobile, would be cancelled and users would be able to answer phone calls free of charge, but they were disappointed.

 

"There is still big room for price cuts," said Yi.

 

Chen Yuping, director of the exchange center with the Telecom Academy under the Ministry of Information Industry (MII), agreed.

 

The number of mobile users in China has grown rapidly in recent years. China Mobile has around 8 million subscribers in Beijing and China Unicom 3 million. Call charges, however, have remained stable.

 

"It has become the unavoidable trend for operators to cut call charges with the growth in subscribers," said Yi.

 

Yi reckoned the price adjustment was due to pressure from subscribers and also in anticipation of future development.

 

The government set up China Unicom 12 years ago in a bid to introduce competition in basic telecoms services. China Mobile and China Unicom later became the only two companies in China providing mobile services.

 

But they hold different licenses, one on GSM and the other on CDMA, so real competition had been minimal.

 

More operators are expected to enter the market with the coming third generation mobile communication. "Competition would lead to price cuts and the adjustment now is preparing for 3G," said Yi.

 

"If operators choose to make big price cuts after the introduction of 3G, they risk losing the trust of customers, so they have to move in advance," said Yi.

 

The potential for growth in the telecoms market is moving to the lower end, including the rural areas.

 

"The price cut also aims to develop low-end users and is part of its development strategy," Yi said.

 

The government is playing a less important role in call charge structuring as the price cut this time was proposed by China Mobile and ratified by the MII. In the past, all call prices were set by the government.

 

Yi said as the cut was limited to voice services which were shrinking, the present price adjustment would not significantly affect sales.

 

(Xinhua News Agency May 10, 2006)