Chinese operators get into bed with WeChat

Chinese operators – well, two of them anyway – have bowed to the inevitable and are striking deals with popular messaging service WeChat.

The pathbreaker is China Unicom, which is to announce a partnership in Guangzhou this afternoon.

China Telecom is also said to be prepping a service which would give users 2GB of WeChat and Sina weibo data for just 6 yuan (0.98) a month.

Both partnerships will take place in Guangdong, the wealthy southern province, and have a flavour of ‘suck it and see’ as operators test out the cooperative approach to dealing with OTT.

Missing from the party is China Mobile, which early this year skirmished with Tencent, the company behind WeChat, complaining the service was using up valuable network resources.

Rumours swirled that WeChat would be forced to charge its 300m users but, as this blog pointed out at the time, it was only China Mobile that had a problem, thanks to its under-powered 3G network. Plus it was unlikely that a newly-installed government would make itself so gratuitously unpopular.

The washup of that imbroglio is that the two smaller operators have gone over to the ‘enemy’ while China Mobile is on its own.  

According to Sohu IT, China Unicom is offering WeChat Wo for WeChat data at 15 yuan a month for those already with a minimum 36-yuan monthly package. (Wo is Unicom’s mobile data service.)

WeChat Wo will come with HD photos and HD movies, some free games, and the ability to support Unicom’s Wo payment feature. If all goes well in Guangdong, Unicom is hoping for quick expansion into other southern provinces such as Jiangsu, Zhejiang and Fujian.

For the operator, this is an important ‘ice-breaker’ in forging cooperation with OTT players, a Unicom source told Sohu IT. For Tencent, it is a chance to grow the business with a strong partner with a deep channel. Tencent chief Pony Ma reportedly played a direct role in the negotiations.

Such OTT partnerships are new to mainland China, but they’ve been in the Hong Kong market since last year. Hutchison launched a WhatsApp bundle last September, while PCCW has been selling a WeChat package since February.

Meanwhile, China Mobile is trying to go it alone with messaging app Fetion and Skype-like voice application Jego. Embarrassingly it had to pull Jego from the domestic market just after launch because mobile VoIP is still illegal in China.

Yet this won't trouble China Mobile. It's still working the old playbook, focusing on networks, not apps. At year-end, while Telecom and Unicom are planning their LTE networks, it will be racking up 4G subs.

Chinese cellcos shape up for $49b 4G rollout: report

In the wake of the government decision to accelerate 4G licensing, Chinese operators have begun positioning themselves for a network rollout battle worth as much as 300 billion yuan ($49bn).

China Telecom is to launch its first 4G trial next month, while both Telecom and rival Unicom are reported to be planning to start network construction by year-end.

China’s State Council declared ten days ago that it aimed to issue 4G licences by the end of the year.

China Telecom will offer its first 4G service on its trial LTE network during the Asian Youth Games in Nanjing next month. It is official communications sponsor of the event and will deploy at major games venues, tourist spots and hundreds of official games vehicles.

Chairman Wang Xiaochu last month confirmed that the operator, which runs cdma2000 and EV-DO networks, would roll out nationwide with both FDD and TD-LTE flavours of 4G. FDD-LTE will provide broad coverage around the country, while TD-LTE will be used to provide extra capacity in densely-populated urban areas.

Previously both China Telecom and China Unicom had been bearish on 4G, most likely because of the desire to maximise the life of their 3G investments.

By comparison China Mobile has firmly embraced it and in the past 18 months has built trial networks in 13 cities. Last month it called tenders for a national 100-city rollout.

Now both Telecom and Unicom have now stepped up their network investment and rollout plans to bridge the gap, the Economic Information newspaper has reported.

China Telecom will expand its forthcoming LTE trial from four to 31 provinces, and is preparing to call tenders. 

China Unicom, which is expected to rollout exclusively with FDD-LTE, is still at the trial planning stage. However, its initial deployment is expected to be around 31,000 base stations.

China Mobile’s national tender calls for the deployment of 207,000 base stations, but this year is expected to invest 80 billion yuan ($13bn) in 180,000 cell stations.

Analysts say the allocation of licences will likely spark an intense competition for 4G coverage. Each of the three operators will build out approximately 200,000 base stations over the next three years, the Economic Information said, citing “multiple industry sources.”

At an average cost of 500,000 yuan per base station, the direct investment in construction could be as much as 300 billion yuan.

Unicom fires up staff with inglorious 'bastard prize'

A China Unicom branch has hit on a staff motivational technique missing from the textbooks.

It's been forcing managers who missed targets to don a green vest bearing the word 'bastard'.

It began in mid-May, when the Guilin, southern China, branch announced sales results and awarded 'prizes'  to the three worst-performing units respectively of 'bastard', 'snail' and 'tortoise'. Managers in those departments were required to wear an iridescent green vest displaying the words while on the job.

This got people fired up in ways that management seems not to have anticipated.

The ‘bastard prize’ story (here in Chinese with video)) went viral with predictable results. Even the usually docile local union declared it a “human rights violation”.

Guangxi Unicom issued an apology to staff via weibo early Monday morning. It's not known if it apologised directly to the humiliated managers, or what penalties, if any, were imposed on the geniuses who came up with the idea.

Anti-trust, Chinese style

Remember the probe into China Telecom and China Unicom for alleged anti-competitive behaviour?

The two companies were called out for price discrimination against rival ISPs back in November 2011 - the first such case under the 2007 Anti-Monopoly Law in Chinese telecoms.

Fifteen months on, it remains the only such case and its status is very much a mystery.

A long piece from the Beijing News (posted here on Sina Tech) quotes an anonymous source as saying the investigation “has met with considerable resistance.”

No surprise there. Anti-trust researcher Wang Xiaoye says that the facts of the case are clear. If this had happened in the EU, it already would have been settled, with heavy penalties imposed on the operators.

The two Chinese operators do face potential fines of billions of yuan, but of course the case has to be settled first.

Technically, there isn’t even a formal record of a case.  It came to light through a CCTV interview with a National Development and Reform Commission official. The NDRC is investigating, but has posted nothing on its website. Neither operator has mentioned the case in its financial reports, or made any contingencies for it.

The two operators have reportedly asked for the case to be dropped, and have promised to cut their broadband access fees (though that presumably would only make it harder for their competitors).

In other words, it’s business as usual in Chinese telecoms; the operators and the MIIT a law unto themselves in an environment of zero transparency.

A Zhejiang University professor, Zhao Wei, is quoted in the story as calling this ‘Chinese-style anti-trust.’

This maybe history, but it's worth recalling because the market is liberalising to allow in MVNOs. The MIIT has had almost nothing to say about how it will guarantee the newcomers access to incumbent networks or protect them from price discrimination. Etcetera, etcetera.

Happy New Year of the Snake. Here’s to more of the same.

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