China Mobile pulls plug on VIP rooms

Members surf the Internet in a VIP lounge run by China Mobile Ltd at an airport in Zhengzhou, Henan province. The telecom carrier is closing its VIP rooms at airports across the country to cut operation costs. SHA LANG/CHINA DAILY

Airport lounges are part of major carriers' cost-cutting strategies

China Mobile Ltd said on Monday it is removing its premium customer lounges at the nation's airports in a bid to cut back on operating expenses.

The world's No 1 telecom carrier by subscriber numbers also plans to close down a majority of its customer clubs, a type of value-added service the carrier introduced years ago to lure new subscribers.

A senior executive from China Mobile said closing the airport VIP lounges is only one part of the company's move to reduce operating costs after the watchdog of State-owned assets ordered the country's Big Three telecom carriers-China Mobile, China United Network Communications Group Co Ltd and China Telecom Corp Ltd-to spend less on daily operations and marketing.

Lu Wenchang, deputy manager of China Mobile's marketing department, told China Daily that although the expense of running the VIP lounges accounts for less than 1 percent of the telecom giant's total operating cost, the move marks the start of a series of cost-reducing efforts.

"Our service at the VIP rooms is no better than those provided by the airlines. It will benefit everyone if we leave the task to the companies who know how to do it well," said Lu.

He added the company is also cutting as many as 1,400 customer clubs, including film fan gatherings and parenting skill exchange platforms run by local branches.

"Only three to five national customer clubs will be preserved by next year," Lu said, adding that the clubs that will be retained provide such services such as credit and financial assistance.

Chinese carriers have experienced sluggish business growth for the past few years after the mobile phone penetration rate reached a plateau.

The telecom industry in China registered more than 862 billion yuan ($139 billion) in business volume in the first half of this year, up by 15 percent year-on-year, according to the Ministry of Industry and Information Technology.

But its growth rate was 0.3 percentage point lower than that of the first five months.

China Telecom, the smallest of the big three, also said it was closing VIP lounges and other minor services.

Beijing Capital International Airport Co Ltd said no one had informed the airport about the closing of the lounges.

Luo Zhijuan, an information center staffer at Guangzhou Baiyun International Airport, told China Daily the airport had not heard anything about the closing but that it was simply a commercial decision, as the operators are just clients of the airport.

She refused to comment about whether the closings would reduce the airport's income.

But analysts said the effect on airports would be minimal.

Income from VIP rooms is considered non-flight income, which accounts for some 30 to 40 percent of the airports' total revenue, said Su Baoliang, analyst from CITIC Securities Co Ltd.

But among the various sources of non-flight income, VIP rooms contribute very little, he said.

"The closing of the VIP rooms will have some adverse effect on airport revenues, but not too much," Su said.