A strategic document obtained by Caixin describes China Mobile’s plans for multilevel cooperation on the wireless media frontier.

By Zhai Hejuan

(Caixin Online) Expanding markets for mobile television, handset reading material and Internet services are key elements of China Mobile’s evolving business model for conquering the new frontier of wireless media.

The latest model is built on a framework of cooperation that divides tasks among regional subsidiaries and forges partnerships with dozens of non-telecom companies willing to accept its technical standards.

Indeed, despite its market dominance and enormous customer base, China Mobile is clearly aware that it can’t conquer alone.

The telecom giant’s plans came into sharper focus March 22 at the annual meeting of the State Administration of Radio, Film and Television (SARFT), where China Mobile announced the commercial launch of a TD-CMMB mobile television service jointly developed with China Broadcasting Corp.

China Mobile also announced alliances with 14 major mobile phone manufacturers. At the SARFT meeting, these equipment makers exhibited 25 TD-CMMB handsets, which are among the 67 TD-CMMB-enabled handsets expected to be launched this year.

Other elements of the company’s multiplatform development strategy, which is tied to a recent government directive to merge China’s media networks, are described in a strategy report obtained by Caixin.

The State Council directive released January 13 set the stage for combining telephone services, Internet, TV and radio broadcasting in a nationwide, integrated network by 2015. The first phase – linking broadcast and telecom networks – is beginning this year.

The strategy report says China Mobile wants to establish technical standards for applications, services and system platforms because “by controlling the standards, the company can avoid out-of-control competition.”

The company defines “controlling standards” as a China Mobile-led process based on multi-party, cooperative development.

China Mobile Chairman Wang Jianzhou has promised the company will not take over the entire industry chain, although it would occupy a commanding height in the area of standards control.

Business Plans

Meanwhile, China Mobile is confronting practical issues tied to its business model. The company built an agency fee business model for its “Monternet” wireless Internet service, while allowing business models for mobile phone applications to take a different path.

Last year, China Mobile imitated U.S.-based Apple by rolling out its own version of an online “app store.” Operators of the mobile marketplace are still ironing out kinks in areas such as terminal adapters and content enrichment, said China Mobile Vice President Lu Xiangdong, to build a healthy value chain.

In addition, China Mobile has been cultivating its “12580” platform for several years. The platform is as a collection of content from voice, Internet, WAP, SMS, MMS and location-based services.

The 12580 system is designed as a strategic point for China Mobile’s transformation from a “mobile communications specialist” to “mobile information specialist.” A decision-maker involved with 12580 told Caixin that competitors include Internet companies such as Baidu, which offers voice search. But China Mobile trails Baidu in advertising revenues, the source said, and 12580’s revenues are far from satisfactory.

“We’re currently under a lot of pressure from the Internet search profit model,” the source said. “We’re exploring how to fully harness China Mobile’s large customer base, first by fully restructuring the mobile business.

“This is so 12580 is not only an information service portal, but also a platform for business promotion and development.”

The strategy report says China Mobile has divided its mobile Internet business into five segments: ring tone music, videos, games, banking-payment services, and electronic reading.

Each of the company’s 30-odd local subsidiaries has been told to choose three segments to serve as a focal point for annual development and assessment indicators. The goal is to effectively divide strategic planning while coordinating joint promotion and development of mobile Internet services among subsidiaries.

The company has divvied up responsibilities by putting five subsidiaries in charge of specific segment operations. E-reading will be handled by the Zhejiang Province subsidiary and mobile banking-payment services are headquartered in Hunan. Gaming is in Guangdong, mobile television in Shanghai and mobile music in Sichuan.

More than two-thirds of the subsidiaries have reportedly selected reading material as a focus area. Plans call for investing 500 million yuan over five years for a mobile reading base, which will be located in Zhejiang’s capital Hangzhou.

China Mobile has signed partnership agreements with a number of traditional publishers and literary websites to provide mobile reading content. A recent survey said that potential revenues of China’s e-reading market this year would amount to 4.6 billion yuan, and may break 10 billion yuan by 2013.

In the mobile banking and payment arena, China Mobile hopes to enhance its business by investing in Shanghai Pudong Development Bank (SPD) – a plan now awaiting regulatory approval. But company managers have disagreed over the direction of the business, and currently most provincial subsidiaries have stopped promoting SIM-card payment systems while freezing online payment services.

One China Mobile insider told Caixin that buying a stake in SPD would not necessarily give the company all qualifications for mobile banking and payment services.

In the mobile TV area, signal limits and quality issues have clouded prospects for TD-CMMB. But China Mobile is pushing to get TD-CMMB handsets on the market anyway.

The company said it planned to lure consumers with special offers worth at least 300 yuan per handset.

A management source at China Mobile’s Guangdong subsidiary told Caixin the company is still studying cooperative ventures with Internet companies such as Tencent. Subsidiaries are also exploring the possibility of developing joint standards with Internet companies because, according to the manager, unified standards must precede cooperation deals.

1 yuan = 14 U.S. cents

 About Caixin: Caixin is a Beijing-based media group dedicated to providing high-quality and authoritative financial and business news and information through periodicals, online and TV/video programs.

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