Discounts completely undercut MVNOs, officials claim

9 Jul 2014

Chinese mobile virtual network operators (MVNOs) are struggling to make their mark on the sector as retail prices continue to sink lower than the wholesale costs levied on the virtual providers, Want China Times reports, citing Beijing paper the Economic Observer. China’s three network operators – China Mobile, China Unicom and China Telecom – have lowered prices to customers whilst maintaining the same charges for MVNOs, effectively eliminating any profit margin for the resellers as wholesale prices are higher than those charged to individuals for the same service. Senior officials from two MVNOs told the daily that they were unable to compete on pricing with the ‘big three’ as the wholesale prices remained too high. Making matters worse, virtual providers have also encountered difficulties regarding the distribution of numbers and SIMs.

As previously reported by CommsUpdate, China’s Ministry of Industry and Information Technology (MIIT) has issued MVNO licences to 26 firms as part of a two-year trial to assess the potential impact of virtual operators on the segment. Industry stakeholders have cast doubt on the regulator’s programme, as the restrictions placed on MVNOs severely limit their ability to compete with the big three. In addition to high wholesale prices eating into margins, the absence of mobile number portability (MNP) dissuades users from switching service provider.

There is some hope, however, and several companies have suggested that the primary aim of their MVNO wings is to simply expand their businesses rather than to compete for market share. As such, MVNOs are expected to use wireless services as a promotional tool to drive up earnings in their core businesses, whilst others, such as e-commerce and social media providers are expected to more closely integrate mobile and VAS offerings into their existing operations to compete with the trio of incumbents.