China Unicom, China Telecom Sign Cooperation Agreement

China Unicom has signed a cooperation agreement with China Telecom. The two operators say they plan to build a new industry paradigm through open cooperation and resource-sharing (including networks, business and services) as well as exploring cooperation at various levels. The two partners also plan to promote structural reform on the supply side, with regard to networks and handsets. With this agreement, China Unicom and China Telecom hope to reduce costs while improving operating efficiency and to provide better networks and services to customers. By doing so they will support the Chinese government’s “Internet Plus” strategy, which is supposed to promote better internet access across the country. During times of major disasters and emergencies, the two operators will help each other’s business recovery, with a view to increasing their ability to safeguard emergency communications. China Unicom and China Telecom intend to expand their handset offerings and to jointly promote six-mode handsets with all-network access as a national standard. They will also enhance network interconnection quality and upgrade the quality of international roaming service through joint cooperation with overseas operators. China Unicom and China Telecom currently lag very far behind the number-one operator, China Mobile, which has over 825 million customers, of which over 287 million are 4G/LTE users. China Unicom, on the other hand, has only 180 million customers, while China Telecom has 141 million. We believe that while structural reforms are necessary, the agreement on the part of the number-two and number-three operators to join forces has been made with the intention of mounting a better challenge to the market leader. However, China Mobile’s dominance is so extreme that it is not likely that the move will put a significant dent in it—so much the more so because this is not a merger but only a cooperation agreement. Nonetheless, the promotion of a national standard for smartphones by the two operators will likely put pressure on China Mobile to adopt it as well, and to some extent will level the playing field and make 2G, 3G and 4G networks equally accessible across the country. Users would benefit from a standardized smartphone environment, because SIMS that are fully interchangeable across operators would make it easier to switch providers without buying a new phone. That would lead to increased competition and more customer freedom.  Tarifica is the global leader in monitoring and analyzing telecom pricing. Covering hundreds of operators in every region of the globe, Tarifica’s databases of mobile, fixed line data and voice tariffs are among the largest and most in-depth in the world. Tarifica is also a leading publisher of benchmark and other pricing reports, and its analysts are recognized authorities in the telecom industry, relied upon by operators and businesses worldwide for pricing insight and guidance. To learn more about Tarifica, please visit www.tarifica.com

Tarifica Global Insights Series

The pace of change in the mobile services industry is constantly accelerating. This means new opportunities will arrive faster than ever before and are likely to play out more quickly as well. Operators must watch carefully for these ‘waves of opportunities’ and quickly take advantage of them before they either become mainstream (and no longer have special value) or become obsolete as new disruptions impact the market.

The Tarifica Global Insights Series analyzes and reports on innovative practices in the development and marketing of consumer mobile plans. Each report describes a significant opportunity in mobile plan development and how operators are creating new plans in response to that opportunity. The series provides comprehensive, in-depth information that identifies best practices across more than 25 countries representing every region in the world, and enables operators to quickly and successfully take advantage of new strategies in plan development and marketing. The reports include case studies in multiple regions that describe best plan implementation and marketing practices that have enabled operators to quickly and successfully take advantage of new opportunities through innovative mobile plan development and marketing.

This series of reports is an important resource for operators that are searching for new and better ways to increase revenue and profits, desire to be perceived as leading edge ‘first movers,’ or need to defend their market share against disruptive offers from competitors. These reports enable operators to take advantage of Tarifica’s unique global vantage point to more quickly bring leading edge offers to market that capture new revenue opportunities.

The Tarifica Global Insights Series is an annual program comprised of four quarterly reports as shown below.

2016 Report Series 

QUARTER 1 (FEBRUARY 2016): Designed for Success – Developing Plans for the Youth and Student Demographic
 Globally, over half the world’s population is under the age of 30. While this percentage varies from country to country, the youth/student market segment has unique needs that must be understood in order to take advantage of this revenue opportunity. Moreover, when young people transition into adulthood and begin to make independent financial decisions, incumbency presents a unique opportunity for mobile operators to win long-term customers. This report will focus on the plans, promotions and other initiatives undertaken by operators to win and hold this key demographic.

QUARTER 2 (MAY 2016): Adapting to Changing Expectations – New Strategies for Pricing Smartphones and Pairing Them with Mobile Plans 
The practice of offering heavily subsidized devices tied to long-term plans no longer meets users’ needs for faster upgrades and shorter or more flexible contracts. As a result, operators are experimenting with numerous other models for selling high-end smartphones to their subscribers. This report will examine financing options, new phone replacement programs and other strategies aimed at helping consumers obtain smartphones and ramping up customers’ monthly mobile spend.

QUARTER 3 (AUGUST 2016): New Frontiers of Mobile Offerings –Partnerships with Streaming Audio and Video Services 
Operators around the world are exploring new revenue sources beyond mobile data. One approach is to partner with streaming media companies such as Spotify and Netflix. Mobile operators are increasingly offering plans with these services included or available as add-ons. This report will focus on the demographics and unique needs of this target market and their impact on plan structures, promotions, marketing practices and pricing. It will also analyze the differences among the various streaming services in terms of consumer perceptions.

QUARTER 4 (NOVEMBER 2016): Avoiding the ‘Dumb Pipe’ Trap – Innovative Approaches to Packaging and Pricing Data 
The decline in calling and messaging revenue has made many operators ever more dependent on data. This has made it difficult for operators to differentiate their offerings without lowering their per-GB price. Many mobile operators have been experimenting with new pricing models for their data to overcome this challenge. Among the many initiatives employed are offering time-limited data, having zero rated or dedicated data allowances for specific services/apps, offering rollover data, etc. This report will identify and analyze all of these tactics, with particular focus on their impact on consumer satisfaction, churn reduction and ARPU.

Analyst Support 

Every subscription comes with five hours of analyst support. Subscribers also receive one-on-one briefing sessions with Tarifica’s Analysts each quarter. Sessions, which include a Q&A format, are designed to help subscribers gain a further understanding of the strategies, innovations, trends and opportunities occurring worldwide in mobile plan development. A subscriber’s colleagues are welcome to attend these briefings.

Subscriber Benefits

The Tarifica Global Insights Series provides subscribers with two distinct layers of analysis:

First, the reports analyze how each service/strategy was deployed, branded and marketed. The reports dive deeply into every element of these plans (their included service volumes, one-time costs, recurring charges, restrictions, marketing campaigns, and more) to provide a comprehensive look at precisely how these plans are being designed and launched. This level of specificity is critical for operators seeking to create successful programs in their own market.

Second, these reports bring to bear worldwide examples and case studies analyzing the factors behind the success or failure of these new strategies. Subscribers to The Tarifica Global Insights Series will be able to learn from operators at the forefront of innovative practices and strategies. Subscribers will be able to view and compare many different versions of these strategies and understand the regional factors involved.

The Tarifica Global Insights Series provides meaningful business intelligence that can be used to design plans that decrease churn and win new customers. Each report evaluates the success/failure of strategies based on key performance indicators, assesses the ease/difficulty of replicating each approach and provides detailed sets of best practices for adapting the program to other markets.

The Tarifica Global Insights Series will facilitate subscribers’ efforts to increase revenue and profitability, gain market share, demonstrate innovative leadership and rapidly take advantage of new market opportunities.

Subscription Fee
The price for an annual subscription that includes all four quarterly reports, five hours of enquiry support and quarterly one-on-one briefings is US $15,000. The subscription fee will be reduced to US $10,000 for orders placed by 15 February 2016, representing a 33% early purchase discount.

About Tarifica
Tarifica is uniquely qualified to provide this series based on its singular focus on researching and analyzing mobile plans around the world. In maintaining the Tarifica Mobile Database, Tarifica’s research team tracks and catalogs every mobile plan, rate and offer from over 250 MNOs and MVNOs in 66 countries in every region of the globe. This effort enables Tarifica’s analysts to gain a broad understanding of the latest innovations in plan development occurring worldwide. With this new report series, Tarifica leverages this focus to highlight and analyze the most impactful strategies on a global level.

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China’s MNOs Aim To Save US $6.5 billion in Reduced Capital Spending

China’s three MNOs, China Mobile, China Unicom and China Telecom, have formed a new company—the China Communications Facilities Services —tasked with the construction, maintenance and operation of wireless towers in the country. Despite the MNOs’ major differences in size (China Mobile has 787 million subscribers compared with 293 million for China Unicom and 182 million for China Telecom), the ownership of the new entity is divided relatively equally. China Mobile will control 40 percent, China Unicom 30.1 percent and China Telecom 29.9 percent. The deal has been in discussions since April but took several months to finalize.

At first glance this deal would appear to significantly disadvantage China Mobile. The company currently has around 350,000 telecom towers, which is 40 percent more than both of its rivals combined. This network advantage, which the company built through years of investment, has been a driving reason for its dominant position in the market. Why would the operator not try to continue the strategy that has worked so well by increasing this network supremacy through the construction of additional towers?

We suspect China Mobile’s reasons are twofold. First, Chinese regulators looking to increase competition have been penalizing the company and forcing it to accept lower interconnection rates from the other operators. Setting up a joint venture that will expand the coverage of all MNOs—and likely open the door for new MVNOs—is a strong way to demonstrate to regulators a commitment to open participation and market access. Second, and more important, this decision is likely a reaction to a major shift in the dynamics of the mobile marketplace. China has been at the forefront of OTT usage. MNOs have seen their ARPUs decline as massive numbers of users turn to messaging apps like WeChat, reducing their consumption of minutes and SMS. Compared with this new threat, other MNOs may appear to be not so much rivals as fellow combatants in the same struggle for survival. It is estimated that the three companies will save as much as CNY 40 billion (US $6.5 billion) per year in reduced capital spending, savings that become more critical if revenues are permanently deflated by the likes of WeChat. Given that the Chinese market has represented the tip of the spear for OTT adoption, MNOs worldwide would do well to monitor this new venture in assessing their own strategies to combat OTTs.

 The above item appeared in a recent issue of The Tarifica Alert, a weekly resource that analyzes noteworthy developments in the telecoms industry from around the world. To access all of the latest articles and issues:  http://www.tarifica.com/TarificaAlert.aspx

Chinese Operators in Talks to Share Infrastructure

Responding to media rumors, China’s three largest telecommunications operators, China Mobile, China Unicom and China Telecom, have confirmed that they are in talks to set up a joint venture for the sharing of mobile infrastructure, with the approval of the Ministry of Industry and Information Technology. While the talks are still in the preliminary phase, the companies have indicated that the venture would be for the operation of existing base stations throughout the country as well as the construction of new ones, which the three operators would lease from the venture. The venture, likely to be known as the National Tower Company, will initially have up to US $1.6 billion of capital and will collect rent from the three operators. The idea of sharing network infrastructure makes a good deal of sense for China’s big three. Despite the rapid growth of the Chinese economy and the already huge numbers of customers these operators have, they are all facing challenges. Since the granting of 4G licenses by the Chinese government in December 2013, the operators have been facing the need for large capital expenditures to build out high-speed networks. China Mobile, the largest operator, reportedly plans to build 500,000 4G base stations by the end of 2014, while China Telecom intends to reach 250,000. In addition, all three providers are now operating in a more competitive environment, due to entrance into the marketplace of new entities. The government’s issuance of 19 MVNO licenses promises to shake up the Chinese mobile telecommunications landscape. In this context, the three traditional operators have a common interest in fostering better coverage and quality of service. Sharing the cost, will help all three—though it is likely China Telecom and China Unicom have more to gain here than China Mobile. While the plan should cut costs in the long run and accelerate the rollout of 4G, the initial investment will likely have a short term negative impact on profitability.

The above item appeared in a recent issue of Tarifica's "The Story of The Week", a weekly report that analyzes two noteworthy developments in the telecoms industry from around the world. For past issues or to learn more about The Story of The Week :  http://www.tarifica.com/storyoftheweek.aspx