The short-messaging service (SMS) will enjoy another great year, due largely to the booming local mobile market, industry professionals said.

China's mobile phone users are expected to send a thumb-aching 300 billion short messages this year, predicted Beijing-based Analysys Consulting.

That would be a 50-per-cent increase over last year.

Approximately 200 billion short messages were sent in China last year, the telecoms consulting firm said.

"The SMS market will continue to enjoy explosive growth in 2004 and 2005," Zhang Ying, an analyst with Analysys Consulting, told China Business Weekly.

"The market might show signs of flat growth in 2006."

Zhang predicted there will be 50-60 million new mobile phone subscribers this year.

Ministry of Information Industry (MII) statistics indicate China had 263.478 million mobile phone users at the end of November.

MII predicts China will have 92 million new cellphone subscribers this year.

"Asians have been obsessed with sending thumb-typed short messages," Zhang said.

By limbering up their thumbs to type short messages, Chinese cellphone users have created a "thumb economy" worth billions of US dollars.

In 2002, about 90 billion short messages were sent via cellphones in China.

The explosion of short messages during holidays, such as the traditional Chinese New Year, has caused network traffic jams.

A staggering 7 billion short messages were sent during the first week of the 2003 lunar new year.

That was nearly 10 times more than the previous year.

The low-priced charging system will continue to buoy the SMS boom, said Sophy Zhang, an analyst with IDC (China).

Sending a text message costs a slight 0.1 yuan (1.2 US cents) in China.

"The SMS market still offers huge potential, as a great number of low-end cellphone users are expected to begin using the system this year," Sophy Zhang told China Business Weekly.

Cost-conscious cellphone users have in recent years found SMS a more convenient and inexpensive way to stay in touch without lengthy and costly conversations.

Despite China's huge population, at nearly 1.3 billion people, cellphone penetration remains low.

The SMS boom is also largely due to a successful model developed by mobile operators.

Currently, Web portals offer SMS downloads, mainly greetings and jokes, to mobile phone users, who then send the messages to others.

Cellular operators and Web portals, known as service providers (SPs), share the revenues.

The interconnection of short messaging service with cellular and Xiaolingtong networks will also boost the SMS boom, Zhang Ying said.

Xiaolingtong, known in the industry as PHS (personal handy service), is a limited mobility service that has been aggressively promoted by fixed-line carriers China Telecom and China Netcom.

Xiaolingtong adopts a one-way charging system, and it costs less than the cellular services offered by mobile duopoly China Mobile and China Unicom.

MII officials have said the interconnection might be available in March.

That would enable Xiaolingtong users and mobile phone subscribers to send and receive messages between the different networks.

There were an estimated 30 million Xiaolingtong subscribers at the end of 2003.

Analysts predict the Xiaolingtong market will continue to grow this year.

"That (Xiaolingtong) subscriber base should not be ignored," Zhang Ying said.

Sophy Zhang said she is sceptical about the interconnection in the short messaging between Xiaolingtong and mobile networks.

"I suppose the interconnection will not soon bring a major SMS uptake," she said.

Interconnection is likely to face resistance by China Mobile and China Unicom. Xiaolingtong has become more attractive to customers in recent months.

Although interconnection will contribute to mobile operators' SMS revenues, it might also lure subscribers from cellphone carriers.

In addition, Xiaolingtong generally offers faster data services compared with GSM and CDMA provided by China Mobile and Unicom.

Also, interconnection involves settlement between the two different networks, which requires negotiations between mobile and fixed-line carriers.

MII on November 17 approved an interconnection proposal submitted by China Telecom and Netcom.

On December 23, SMS services of Netcom's Xiaolingtong networks in 10 provinces were linked.

Sending an SMS between Xiaolingtong terminals costs 0.8 yuan (9.6 US cents).

It's unclear when the fixed-line and mobile carriers will reach an agreement on the interconnection issues.

MII will only step in if the negotiations break up, an MII official noted.

"Balancing the interests of different operators will take time," Sophy Zhang said.

(Business Weekly 01/13/2004 page1)