Markets rebuff China Mobile price plan

By Staff and wire reports

HONG KONG, China -- China Mobile continues its downward descent on Hong Kong's Hang Seng Index after announcing a new pricing scheme.

The mainland's largest mobile phone company fell more than 6 percent to HK$40.10 on Thursday, and continued to slide on the index Friday.

Its rival, number-two China mobile firm China Unicom, also announced plans for a new pricing scheme, prompting a sell-off in both stocks by investors worried that the new scheme would hurt the companies' revenues.

Greater pricing flexibility

China Mobile revealed a new, six-level pricing plan on Wednesday to convince customers to pay a bigger up-front fee in exchange for more and cheaper minutes of airtime.

Reacting quickly on Thursday, China Unicom announced plans to reveal its own new pricing scheme to keep its prices below those of China Mobile's.

The charges, approved by regulators and set to take effect later this month, will further liberalize China's tightly controlled telecom sector.

Premised on the notion of "call more, save more," China Mobile said its plan gives it greater pricing flexibility.

QUOTE "Now, mobile users are likely to overpay and pay in double-digit amounts. This is good news." - Joe Locke, ABN Amro

Contract customers will pay a monthly fee ranging from $11.83 to $95.17 (98 to 788 yuan) for anywhere from 170 to 2,588 calling minutes.

Analysts say the plan puts China's biggest cell phone carrier in line with other major carriers around the globe in practicing "yield management," and will slow the inevitable decline in the company's average revenue per user.

Positive step

Nevertheless, China Mobile shares fell 6.32 percent on Thursday, despite what several industry watchers consider a positive long-term step.

"Now, mobile users are likely to overpay and pay in double-digit amounts. This is good news," Joe Locke of ABN Amro told CNN.com.

"When you move to a bucket plan, you round up. You charge for a bulk package and then get more out of it."

With 43 million users at the end of November, China Mobile is the world's second-largest cell phone carrier by number of users after Britain's Vodafone Group.

On Thursday, China Mobile -- the second largest stock in the Hang Seng index by market capitalization -- fell to its lowest level since December 17, 1999.

The stock fall accounted for 189 points of the index's 427 point slide. China Unicom shares fell 5.42 percent to HK$11.35.

Reuters contributed to this report.

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