Chinese mobile subscribers will experience cuts in their phone subscription. (Photo : Getty Images)
The two major telecommunications company in China decided that at the onset of fourth generation technology (4G), roaming charges should be slashed.
An undisclosed employee of China Mobile revealed that by the end of the year, China Mobile will totally eliminate roaming charges.
CEO of China Telecom, Yang Jie, said at the 8th Intelligent Terminal Industry Forum that the company will also be cutting charges on voice calls and traffic.
The company's efforts follow the request from the Ministry of Industry and Information Technology (MIIT) to lessen phone charges.
Liu Dingding, an independent industry analyst, said, "Roaming charges are out of date, and currently, there is virtually no country in the world that still charges for that."
At a press conference, China Mobile's CEO, Li Yue, said that they will encounter a dip in sales if they abolish roaming fees as 36 percent of the company's profit comes from voice calls.
However, the CEO reported that the company's revenue is mainly from traffic generation.
China Mobile's revenue increased 7.1 percent to 370 billion yuan or $56 billion at the first quarter of this year. Liu also reported that they have 429 million subscribers to 4G by June.
"The popularity of 4G services, as well as the growing traffic revenue, heralds the time to initiate a reform to transform the revenue structure," Liu said.
For China Telecom, overseas investments have boosted the sales of the state-owned telecom. They have recently been looking into investing in 4G services in Egypt with Saudi Telecom.
Steven Liu, head of research at China Securities International, thinks that China Telecom is poised to compete with European providers.
He said, "Overseas revenue mainly comes from roaming and is almost negligible," Liu said by phone. "If they were to acquire 4G licenses, it would be more of the goal to establish a presence than to compete toe-to-toe with European operators."
