China Mobile Fee Cuts Carry 1H Cost of $710 Million

China Mobile Ltd. (941), the world’s largest phone company, said government-ordered cuts in fees rivals pay to connect to its network would have cost it 4.31 billion yuan ($710 million) in the first half of this year.

Effective Jan. 1, the fee China Telecom Corp. (728) and China Unicom Hong Kong Ltd. (762) pay to connect a call to China Mobile’s network will drop to 0.04 yuan per minute from 0.06 yuan, China Mobile said in a statement to the Hong Kong Stock Exchange yesterday. The fee paid for text messages to the larger rival’s network will drop to 0.01 yuan from 0.03 yuan.

The fee reductions are the latest effort by regulators in the world’s largest mobile-phone market to push the three state-run carriers to cut prices, offer more choices and improve customer service to China’s 1.2 billion wireless user accounts. China in May said it would allow private companies to lease excess network capacity from the state-owned carriers to create new phone companies.

Had the fees been in effect on Jan. 1, 2013, China Mobile’s interconnection revenue would have been 4.31 billion yuan lower and its interconnection charges 840 million yuan lower in the first half of the year, according to yesterday’s statement.

China Telecom, the nation’s third-largest wireless company, said it will save about 3.14 billion yuan a year after cuts in the fees, according to a separate filing to Hong Kong’s stock exchange yesterday.

The adjustment in connection fees will also result in a revenue reduction of about 560 million yuan based on call and message traffic volume in 2012, Beijing-based China Telecom said in the statement. The wireless carrier said it was informed of the fee changes by the Ministry of Industry and Information Technology, which regulates the industry.

China Unicom, in a separate statement yesterday, said the lower fees will have a “positive impact on the profit of the Company for 2014,” without estimating the effect of the change.

To contact Bloomberg News staff for this story: Edmond Lococo in Beijing at elococo@bloomberg.net; Joshua Fellman in New York at jfellman@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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