HONG KONG-Even though the Chinese paging market is teeming with around 1,700 operators, the market remains heavily regulated. Even paging operators in the well-heeled southern and southeastern Chinese provinces of Guangdong, Fujian and Zhejiang continue to face the same strict regulations as their counterparts throughout China, although they are home to 40 percent of the country’s paging users.
Instead of allowing the market to shake out naturally, the Ministry of Information Industry (MII) has taken various measures to reduce the number of operators.
Last year, the MII drove 200 paging firms out of the market, and it aims to nullify licenses of another 100 operators nationwide within the year. In the first half of 1999, the number of paging firms overall slipped from 2,000 to 1,700.
Regulated consolidation
The MII in some cases requested small operators to merge with large ones, such as Guoxin Paging, the ex-paging arm of China Telecom and now a subsidiary of China Unicom. Guoxin has 40 million paging subscribers out of the national total of 70 million.
The Chinese government noted that the paging marketplace is crowded with too many small-time operators and said carriers with small subscriber counts cause ineffective uses of spectrum resources.
Major southern cities like Guangzhou and Shenzhen each usually have more than 70 paging operators.
In Guangdong, three operators-Haiou with a customer base of 20,000, Xianfeng and Hongxin with a user count of 50,000-were merged with Guoxin in the province earlier this year.
Operators with a customer base below 3,000 after two to three years of operation will have their licenses revoked, according to an MII statement made earlier this year.
One industry source said the number of paging firms with customer bases below 3,000 accounts for around one-third of the total carriers in China.
MII’s statistics indicate 8.71 million paging users were served by 403 operators in Guangdong as of year-end 1998, with the 10 largest companies serving more than 5 million customers.
Marketing regulations
Paging operators are not allowed to offer discounts without first submitting applications to the regulatory body. According to the MII, it takes about 15 days to give an operator a decision on its application.
Unlike in many other markets, free pagers and exemption of monthly fees are considered anti-competitive actions in China and, therefore, are prohibited.
Such factors have made it difficult for paging firms to respond immediately to the market and, thus, more vulnerable to the onslaught of mobile telephony.
Slipping subscriber numbers
Guangdong province, for instance, has a shrinking paging industry. The province had 1.29 million new 1998 paging users, compared with 1.34 million in 1997.
Guoxin’s network in Fujian province, a neighbor of Guangdong, had only 200,000 new users last year.
Industry sources believe the paging market in the southeast coast area is not growing as quickly as it used to, but that the pager penetration rate will surge from the present 10 percent to around 20 percent before the industry reaches saturation.
However, cities like Guangzhou and Shenzhen already have reached 30-percent pager penetration, and further growth is difficult with churn rates ranging from 10 percent to 20 percent in these southern cities.
Shenzhen-based China Motion Telecom Development Co., having most of its customers in southern China, has repositioned its business by integrating paging with Internet services. Several other companies have done the same.
The operator is the fourth largest in China, posting a subscriber count of more than 2 million.
Jun Yang, vice chairman of China Motion Telecom Development Co., said free Internet-related paging services-including e-mail paging, Web paging, a scheduled paging service and providing three days worth of paging records-will help reduce churn to 7 percent from the current 10 percent.
Hong Kong-based China Motion Telecom International is a business partner to China Motion Telecom Development Co., providing technical support services to the Shenzhen company. China Motion Telecom International Chairman Tony Hau said paging still has room to grow in the coming few years.
“On average, (the) monthly tariff for numerical paging service is around 20 RMB (US$2.40) and for Chinese service it is about 40 RMB (US$4.83). There is a huge gap between paging tariffs and that of cellular service. So I believe paging is still appealing to users, especially those living in suburban and rural areas,” Hau said.
Hau, however, admitted the affordable paging tariff might merely attract price-sensitive users and therefore does not help reduce the churn at all.
