China Mobile mulls tighter control on SPs
By Li Weitao (China Business Weekly)
Updated: 2004-11-28 09:33

That would create an even bigger challenge for SPs, which have seen their revenues decline in recent months.

China Mobile is considering changing its revenue-sharing scheme with SPs, industry insiders said.

China Mobile usually takes 20 per cent from the revenues generated from SMS (short messaging service) sent via Web portals.

SPs keep the remaining revenues.

China Mobile in August launched a new subsidiary, Aspire Information, that specializes in data service.

Industry sources said China Mobile hopes to build Aspire Information into a "super" SP that can bemerged with smaller SPs.

Under a new scheme, established SPs may become pure content providers (CPs).

And Aspire Information may seek a bigger portion of the shared revenues.

China Mobile has been promoting its mobile information service centre (MISC) platform.

Previously, SPs like Sina Corp, Sohu.com and NetEase.com, could directly charge users for their wireless value-added services.

With MISC, China Mobile, rather than the SPs, will charge users.

Adoption of MISC has laid the foundation for China Mobile to impose tighter control over SPs, analysts said.

The mobile data value-added market in China grew a slight 1.6 per cent in the third quarter, indicates Beijing-based Analysys International.

The research house attributed the sluggish growth to government and operators' tightened regulations, and the switch to MISC.

The size of the SMS market in China dropped to 900 million yuan (US$108.4 million) in the third quarter, from 1 billion yuan (US$120 million) in the second quarter, Analysys said.

A change in the revenue-sharing scheme could severely affect SPs, said He Wei, an analyst with telecoms consultancy BDA China Ltd.

"In the short term, operators will not abandon SPs. But over the long run, it's still possible operators might seek to increase their revenue sharing," he said.

However, some analysts wonder if such a change will take place soon.

"For China Mobile, a dramatic change to its partnership scheme may be harmful," said Zhou Yi, an analyst with Analysys.

"A change in the revenue-sharing scheme will not be in line with China Mobile's commitment to SPs, which will negatively affect market confidence."

As fixed-line carriers China Telecom and China Netcom are expected to enter the cellular market soon, China Mobile is unlikely to risk letting SPs turn to other operators, Zhou said.

China Mobile will take a prudent approach to the revenue-sharing scheme, he said.

Guo Chang, an analyst with Beijing-based CCW Research, said China Mobile may seek to "stabilize" the market, which has been hit hard by the government and operators' crackdown on irregularities.

However, China Mobile may seek some changes to better prepare it for the future 3G (third-generation) wireless communications market, he added.

"I believe, for most of the services, the revenue-sharing scheme will remain unchanged, for a time," Guo said.

"But for some new services, China Mobile may seek a bigger share of the revenues when it institutes the scheme. Anyway, the wireless value-added market promises huge potential."

China's mobile value-added market will reach 38.54 billion yuan (US$4.64 billion) this year, compared with 23.32 billion yuan (US$2.81 billion) last year, predicts Shanghai-based iResearch.

The market will grow to 64.05 billion yuan (US$7.72 billion).

By the end of last year, China had more than 1,100 mobile service providers, indicates Beijing-based ADS Consulting. And that number is growing rapidly.

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