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Chinese SMS Market Faces Slowing Growth

Investors were unhappy when China Mobile decided to set the price of sending an SMS message at 0.1 yuan (1.2 US cents) several years ago.

"I had to avoid meeting investors in our listed firm," recalled Lu Xiangdong, deputy general manager of China Mobile Communications Corporation, the parent of the listed firm China Mobile (Hong Kong) Limited.

"They went after me and asked why we set such a low price?"

Lu said the price of sending an SMS on the Chinese mainland was the cheapest in the world. At that time, sending an SMS message in Hong Kong cost HK$2 (25.6 US cents), but later dropped to HK$1 (12.8 US cents).

"Now I can say some consumers might think our price is still expensive," Lu said.

The subsequent runaway success of SMS in China, largely fuelled by the low-prices, took most investors and even China Mobile by surprise.

In 2002, about 90 billion short messages were sent via mobile phones in China.

That number jumped to 217.7 billion last year, according to the Ministry of Information Industry (MII).

"That is an astronomical number. Frankly speaking, our initial idea was just to replace the beeper with the mobile phone," Lu told the launch ceremony of a joint SMS business centre last month.

Among China Mobile's more than 200 million cellular users, 75 per cent send an average of more than 100 SMS messages every month.