July 19, 2004
SMS business in China at risk
From stricter government regulation to lower charges for voice calls, the hitherto lucrative SMS business is facing multiple dangers in the months ahead, the China Business Weekly newspaper reported, according to TheAge.
"China has 300 million cost-conscious cellphone users, many of whom have taken advantage of the fact that a short text message is charged only 0.1 yuan (one cent).
This explains why 240 billion short messages were sent off last year, a whopping 170 per cent increase from the year before.
However, this year's growth is likely to be much less impressive, estimated to come in at about 25 per cent.
"It's unlikely the SMS market will witness in future the explosive growth rates recorded in past years," said Liu Lei, a local analyst.
Partly to blame are new rules aimed at weeding out pornographic, fraudulent and illicit messages, according to the paper.
Calls for greater official attention to the industry have also been fuelled by user complaints that they have been charged for months even though they have only used SMS services once, if at all, the paper said.
"Such irregularities reflect the loose supervision over the SMS market," said Xie.
As government supervision is becoming more stringent, the SMS market is also being battered by other trends, such as a gradual decline in the price of mobile tariffs.
In many parts of the country, mobile tariffs have fallen as low as 0.2 yuan (two cents) per minute, hollowing out much of the cost advantage that SMS has enjoyed in the past.
Completing the list of the industry's woes, cellular operators may try to renegotiate their revenue-sharing schemes with websites to get a bigger piece of the pie.
Currently, top cellular operator China Mobile keeps 15 per cent of the revenue from its scheme, leaving 85 per cent to the websites."
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