China Mobile to end ‘zero yuan’ plan for new iPhone 6

China Mobile, the country's largest telecom carrier by subscribers, announced over the weekend it will cut its subsidies for its iPhone 6 contract package plan, as analysts said on Sunday that high subsidies are no longer the most effective way to maintain users' loyalty in the new era of 4G technology.

While previously China Mobile had a "zero yuan purchase" promotion that allowed customers who paid for multi-year contracts in advance to get the iPhone for free, it canceled this plan for the first time and reduced the discount on mobile phone calls to about 20 percent off in one of its cheap-call plans for iPhone 6, an employee with a China Mobile sales department in Beijing told the Global Times Sunday.

Other carriers such as China Telecom and China Unicom have also made similar moves, according to media reports.

Analysts said that the need for China Mobile to offer high discounts for the iPhone 6 has been weakened after the iPhone 6 adopted the TD-LTE 4G network standard as well as the FDD-LTE 4G standard.

During the 3G era, telecom carriers and smartphone makers used different 3G network standards, making it possible for carriers to maintain users for a long time after winning the users through highly subsidized offerings, Ma Jihua, an industry expert at Beijing Daojing Consultant Co, told the Global Times Sunday.

But the use of 4G means that users can switch among telecom operators even if their contracts have not expired, Ma said.

In addition, analysts also attributed the subsidies reduction to the new policy issued by the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) in July.

According to the policy, all three major telecom operators including China Mobile are required to cut marketing costs by 20 percent within three years.

Cutting user subsidies is a way of lowering marketing costs, said Ma.

However, China's telecom operators seem to be suffering fierce competition from OTT services offered by Internet companies. According to its financial report released in August, China Mobile's net profit fell by 8.5 percent year-on-year to 57.7 billion yuan ($9.4 billion) in the first half of this year.

Ma believed the profit decline is likely to have led to SASAC's decision.

In order to offset its profit decline, China Mobile plans to further expand into new businesses. A new Internet company will be established by the company to boost its Internet service, according to a press release e-mailed to the Global Times on October 9.