Chinese Mobile Content Clampdown - Positive Impact
The China based research group, Analysys International has said that China Mobile and China Unicom's new polices on mobile value-added service subscription will have a more positive impact than negative impact on the community. In the short term, the new policies will have less than a 10% impact on China's whole situation; and in a long-term point of view, it is the booster that will improve industrial competency.
News Background
China Mobile recently notified value-added service providers (SP) of its policy changes for all mobile value added service (MVAS) subscriptions on its Monternet platform, which include an extended trial period, double reminder and unified unsubscription channels.
In April, China Unicom formally launched its new SP contract in order to further regulate and optimize the telecom market. The new contract classified 53 breaches of contract.
Quick Analysis
1. Analysys International says a more regulated industry environment is necessary to the mobile VAS market in China, and is beneficial to the long-term development of the mobile value-added service industry.
By the first quarter of 2006, China's mobile telecommunications subscribers reached 410 million. Total mobile VAS market size (SMS excluded) reached RMB 6.23 billion in the first quarter. Although the industry is in a rapid growth phase in general, there are many unregulated activities in the market. Therefore, appropriate industrial regulations can control irregular operations in a certain degree and build a healthy development environment for the market.
2. China Mobile's new policy will not limit the rapid development of the mobile VAS market but will drive SPs to improve product and service quality.
Users are the key resource that operators compete for. When 3G licenses are issued, the competition will get heavier. Therefore, mobile carriers will inevitably establish related measures to regulate business flow to improve user satisfaction and to protect current subscriber base. These measures are made to improve user experience, which will bring much more revenue in the future.
As a listed company, China Mobile faces pressure both from shareholders and the market. Considering the development of its mobile VAS business, the company will implement its regulation plan step-by-step, which will guarantee smooth transition and will not greatly impact its financial performance.
China Mobile's services, which are affected by the new policy, account for less than 20% of the big board. With the rapid growth of other services and the smooth transition of business adjustment, impact on the total VAS revenue will be very small. China Unicom's new contract will pose challenges to small SPs but will not impact the total revenue either.
3. The new policies have higher requirements to SPs, which will speed up the rule of survival of the fittest. Those SPs who lack core competency will be forced out, while leading SPs will further expand market share and market influences.
According to Analysys International, the top 10 SPs have accounted for 56% of the total market in China; about 30% in the revenue structure of over 70% small and medium SPs come from gray revenue. As regulatory policies gradually strengthen, SPs' gray revenue will be constantly cut down. Small SPs will be forced out; and some big SPs will become stronger."
Posted to the site on 24th July 2006