China mobile carriers get a message: Cut marketing

Beijing has told China’s three state- owned wireless carriers to cut marketing expenses, saying they overspent on subsidies and advertising for devices such as the iPhone, according to sources familiar with the matter.

The State-owned Assets Supervision and Administration Commission (SASAC), the body responsible for managing China’s state enterprises, told the carriers to cut promotional spending by a combined 40 billion yuan ($6.4 billion) over three years, said the sources, who asked not to be identified because the order has not been made public.

A reduction of subsidies would make high-end devices like Apple’s iPhone or Samsung Electronics’ Galaxy S5 more expensive in the world’s largest smartphone market. That may benefit domestic phone makers Xiaomi, Lenovo Group and Coolpad Group, all of which offer less costly models.

The three carriers are China Mobile, China Unicom and China Telecom. Each has a Hong Kong-listed unit.

China Mobile began selling the iPhone in January after six years of negotiations. Discounts for the Apple device are one reason why subsidies on all phones will rise 29 percent to 34 billion yuan ($5.4 billion) this year, Chief Financial Officer Xue Taohai said in March. The company has not received formal notification of the SASAC policy, said Rainie Lei, a Hong Kong-based spokeswoman for the listed unit, China Mobile Ltd.

“The company is always working to increase revenue and control costs, including marketing costs,” Lei said in an e-mail on Tuesday.

Bloomberg