BEIJING: China told the nation’s three state- owned wireless carriers to cut marketing expenses because they overspent on subsidies and advertising for devices such as Apple Inc’s iPhone, sources said.
The state-owned Assets Supervision and Administration Commission told the carriers to cut promotional spending by a combined 40 billion yuan (RM20.29 billion) in three years, said the people, who asked not to be identified because the order hasn’t been made public.
A reduction of subsidies would make high-end devices like the iPhone or Samsung Electronics Co’s Galaxy S5 more expensive in the world’s largest smartphone market as the carriers expand fourth-generation services. That may benefit domestic phone makers including Xiaomi Corp, Lenovo Group Ltd and Coolpad Group Ltd, which offer less costly models.
“If carriers do as asked, this is likely to benefit lower cost phones, including both local and foreign vendors that also have low-cost models, except for Apple,” Sandy Shen, an analyst with Gartner Inc, said.
“Of course due to the cost competitiveness of local vendors, they are likely to benefit more than foreign brands.”
The three state-owned carriers are China Mobile Communications Corp, China United Network Communications Ltd and China Telecommunications Corp. Each has a Hong Kong-listed unit.
As much as 60 per cent of phones sold in China are subsidised and any reduction could weigh on the high end of the market, a segment that accounts for about 20 per cent of sales, analysts led by Steven Milunovich at UBS AG said in a note to clients. Apple had about 33 per cent of China’s premium sales last year, according to UBS.
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 per cent to 34 billion yuan this year, chief financial officer Xue Taohai said in March. Bloomberg
