Thursday, March 03, 2005

The Shanghai branches of China Mobile and China Unicom sign agreement to stop the price war

China Mobile Shanghai branch and China Unicom Shanghai branch have signed an agreement on Feb. 28, aiming at stopping the "excessive competition" in the market, reported Sina(in Chinese), but it remains to say if it will work or not in the future.

Under the support of the local regulator, both companies signed the agreement including the terms in the communication mechanism, interconnecting, pricing. etc. Report quoted sources saying that the marketing department in both companies planed to meet now and then to exchange the opinions.

The reason to sign the agreement is mostly because of the hard competitions in the pricing of Shanghai market. In a fast developing city in the country, both telecom operators were eager to get market share as more as they could, which resulted in the gradual direct or non-direct decline in the prices of the mobile calls. Either of the two marketing departments would update its policy immediately after the competitor reports a new discounting policy. The market is also a place where China Unicom, the comparatively weaker one in terms of the market in the country, get the market share not less than China Mobile. Last year, the revenue of China Unicom Shanghai branch reached 1.5billion RMB(almost 190 million US dollars), ranked as the No.1 in all the branches of the company.

The user loyalty should be more important to the operators, than the low price and the communications between the operators. Though the advantage of low price may attract some users, most of the users, especially high-end ones, will keep subscribing their favorite services. The operators should try to think more ways, instead of decreasing the price, to attract new users, both in the low-end and high-end markets.

In other perspective, the competition on the price is the natural development to lower the comparatively-high price of the mobile call fees in Chinese market, though it seemed that the operators haven't been used to it.

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