Fringe telecom players entering the fray

A JD.com advertisement at a bus stop in Shenzhen, Guangdong province. Provided to China Daily

Mobile virtual network operators are expected to inject new life into China's telecoms industry rather than simply drive down service charges in the country, insiders and analysts said.

Since the beginning of May, many of China's more than 19 licensed mobile virtual network operators (MVNOs), which are allowed to run basic telecom businesses by renting infrastructure from telecom operators, have launched their own services.

JD Mobile, the telecom department of JD.com Inc, one of China's leading e-commerce companies, said on Thursday that it will start selling mobile phone numbers beginning with "170" - a signature number for MVNOs - on Saturday.

But rather than making the telecom business a new growth point for JD's revenue, Lan Ye, chief marketing officer of the e-commerce player, said the telecom service is expected to be a catalyst to drive the company's other core businesses, such as e-commerce, logistics and Internet finance.

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JD Mobile said its voice service costs 0.15 yuan (2.4 cents) per minute with data service priced at 0.15 yuan per megabyte and text messages going for 0.1 yuan apiece - no cheaper than service packages launched by China's three telecom giants: China Mobile, China Unicom and China Telecom.

However, JD Mobile will offer some preferential policies for JD.com customers. For example, for every 2 yuan they spend shopping on the company's e-commerce platform, customers will receive 1 minute of voice service and 1 megabyte of data.

"That means those who spend 1,000 yuan on JD.com will get 500 minutes of voice service and 500 megabytes for free, which can basically cover one person's telecommunication demand in a month," said Yan Xiaobo, who heads JD Mobile.

Insiders say that such pricing strategies are basically publicity stunts and can't last forever.

Ng Kuo Pin, head of Communications, Media & Technology with Accenture Greater China, an international management consulting firm, said that with an increasing number of mobile virtual network operators, few will try to play the price game.

"Price games cannot be sustained too long; ultimately, they will have to pay three operators for the network usage," he said, adding that rather than driving service charges down, the introduction of MVNOs in China will generate new dynamics into the market.

He said that MVNOs mainly play the role of covering niche markets, which traditional operators are not in the best position to cover. So outside China, the market share captured by MVNOs is not big.