Rumor: China Mobile to Shift Handset Subsidies from 3G to 4G
China Business News, 7/07/14
According to an industry insider, China Mobile (NYSE: CHL; 0941.HK) will gradually reduce its 3G mobile handset subsidies in the second half of 2014, and shift all subsidies to 4G mobile handset models. The company will also reduce and gradually cancel free handset giveaways, namely on contract phone sales, and switch to service package subsidies. Additionally, retail channel commissions will be calculated based on average revenue per user (ARPU), rather than the previous system whereby channel retailers received a percentage of handset sales revenue.
China Mobile has also expanded the scope of its 4G terminal subsidies, cancelling the company's policy announced in May to not subsidize 3-mode TD-LTE terminals that enter the company's inventory after May 31. The subsidy rate for 5-mode TD-LTE terminals will not exceed 50%, while the subsidy rate for 3-mode TD-LTE terminals will not exceed 30%.
Additionally, many of China Mobile's provincial subsidiaries have issued directives to their sales departments requiring them to first clear 3G handset inventory to avoid overstock as the price of 4G handsets fall.
Editor's Note: For more background on this topic, please see "Rumor: SASAC Requires Telcos to Reduce Marketing Expenses" MD 6/04/14 issue and "Rumor: Telcos to Reduce 2014 Handset Subsidies by RMB 10 Bln" MD 5/15/14 issue.
Keywords: China Mobile subsidy handset wireless 4G 3G CHL TD-LTE 0941.HK