China Telecom turns up the heat in mobile war

3 Feb 2003

China Telecom is defying government insistence that it ease back on efforts to garner a share of the lucrative mobile segment, by pushing ahead with its marketing campaign for ‘Go-to-phone’ – a service which allows wireless users to switch calls through to fixed lines when they are in the office or at home. China Telecom claims to have already signed up over ten million subscribers to its non-licensed Xiaolingtong (smart little connector) service, where users can sidestep paying a charge to their network operator for receiving incoming calls; the plug-in device piggybacks on the incumbent’s local loop to offer a cheap service in urban areas. However, just weeks after officially suspending the service following complaints to the government by national wireless operators China Mobile and China Unicom, China Telecom is continuing to market ‘Go-to-phone’ in retail outlets in southern China where staff have been telling customers that the service has never been interrupted. The popularity of Xiaolingtong has seen China Telecom sign equipment and handset contracts worth USD500 million in January alone with local supplier UT Starcom; it has also announced plans to extend the service to the cities of Guangzhou, Shenzhen and Dongguan.

Local analysts suggest, however, that China Telecom’s aggressive policy is damaging to the country’s two licensed wireless players – China Mobile and Unicom – and is making a mockery of the seemingly absent regulatory regime. According to Beijing-based consultancy BDS, the net result of the PTO’s actions is ‘complete confusion among investors, because there’s lots of risk out there’. The two mobile players currently operate a two-way charging system whereby both parties involved in a telephone call are charged a portion of the fee involved, but the Xiaolingtong device upsets the status quo. Instead, China Telecom can charge for selling the actual unit and make a fee for providing the service. In response, both official wireless operators have been forced to slash their prices in some cities, further undermining revenues.