In a sign of how local regulatory changes in one country can have global implications, China’s decision to introduce new mobile phone rules has led a UK company to warn its revenues would be hit hard.
The problem stems from China’s Ministry of Information Industry, which is to introduce measures to address consumer complaints about mobile phone subscriptions in China. The Ministry has asked China’s largest mobile operator, China Mobile Ltd, to implement over the next six months a number of changes that will make it harder for Lancaster, UK-based MonsterMob Group Plc to hold on to its subscribers in China.
China Mobile has been asked to introduce a number of measures aimed at addressing complaints over mobile subscription services. The measures include China Mobile giving subscribers an 11- to 41-day free trial for any value-added mobile service they order, during which the two reminder notices will be sent out, warning that the user is about to be charged. Currently China Mobile only sends out one reminder immediately after a subscription is ordered.
MonsterMob is perhaps best known as a provider of mobile phone ringtones and other downloads, and its Chinese operations account for approximately 50% of total group net revenues. The company believes that the short-term impact of these changes could be substantial, as around 40% of its net revenues in China are currently subscription-based. The company said it was taking steps to migrate revenues onto a single purchase basis where practicable.
The news sent MonsterMob’s share price crashing down 58.9% to 56 pence ($1.02) on the London Stock Exchange. However, the company believes that the new regulations will reduce the number of companies offering mobile download services in China, which should benefit its Chinese business in the long-term.
MonsterMob said it would now concentrate on single-purchase sales in China until the environment for subscription services improves.
China Mobile is the world’s largest mobile operator in terms of customers, as it operates in all 31 provinces in China and Hong Kong, which gives it an aggregate subscriber base of nearly 265 million. It recently lost out on acquiring Millicom International Cellular SA, a Luxembourg-based operator of mobile services in developing markets, when Millicom terminated discussions after struggling to achieve an attractive offer.