China’s mobile providers are cutting marketing expenses by $6.5 billion

Under the requirements of the State-owned Assets Supervision and Administration Commission of the State Council, China’s three leading telecom carriers, China Telecom, China Mobile and China Unicom, will slash marketing expenses to the tune of over 40 billion yuan (US$6.5 billion) over the next three years, which might slow the popularity of 4G services in China. China Mobile will see the largest cut, at 24 billion yuan (US$3.9 billion). The belt-tightening move will put a damper on the subsidies provided by the three carriers for purchase of mobile phones by their subscribers, as a result of which mobile-phone subsidies by the trio will drop by 10 billion yuan (US$1.6 billion) this year, including 5 billion yuan (US$807 million) for China Mobile and 2.5 billion yuan (US$403 million) each for China Telecom and China Unicom, according to Shanghai’s National Business Daily.

Three major Chinese telecom providers are required to cut marketing expenditure by 20 percent each year over the next three years. It means China Mobile, the biggest player in the market, will have to reduce 24 billion yuan ($3.8 billion) in promotional activities during the period, with the total cutback among the three operators will reach $6.4 billion, a Sohu news report said on Wednesday. The $6.4 billion cutback in expenditure almost amounts to twice the profits of China Unicom and China Telecom combined in 2013. It’s also equivalent to one-third of the $19.5 billion that China Mobile earned in that same period. China Mobile, China Unicom, and China Telecom, which are covered under the order issued by the state-owned Assets Supervision and Administration Commission of the State Council (SASAC), remain the largest telcos in China — indeed the world. SASAC inspects and approves business activities of all government-run enterprises in China. The notice didn’t specify the scope of “marketing expenses” among the operators, but they are generally interpreted as “costs incurred to implement enterprise marketing management and practical activities,” including promotional and advertising costs as well as payroll, bonuses, and training fees directed to sales’ personnel in the outlets, the report said. An immediate effect to the cutback will see a slump in terminal subsidies among the operators. The three operators indicated that they now plan to cut more than $1.6 billion in handset subsidies this year, with China Mobile accounting for nearly 70 percent of that figure.