China Mobile launches new media arm to provide content

China Mobile Communications Corp launched a new media arm on Thursday to provide digital content, as the leading wireless carrier tries to cushion the impact from its ailing traditional communications business.

The new company－Migu Culture and Technology Group Co－will be China Mobile's first subsidiary that will focus on providing products that can cater to the demands of the mobile Internet segment.

China Mobile is also moving five of its existing businesses－music, video streaming, e-books, animation and gaming－to the new company. The company will also invest more in Migu to make it a formidable player in the market, said Li Yue, vice-president of China Mobile.

Previous media reports said China Mobile was planning to inject 10.4 billion yuan ($1.68 billion) into Migu, with the first investment of 7.1 billion yuan set to take place this year.

Migu plans to spend huge amounts of money to acquire genuine digital products and have at least 20 original content providers with turnover of more than 100 million yuan each and 30 content distribution channels with turnover of more than 50 million yuan each.

The mobile Internet push has been at the forefront of China Mobile's agenda due to the sluggish growth of its traditional business. The wireless carrier, which is China's largest in terms of customers, has seen it profit dip by 9.7 percent in the third quarter of 2014, compared with a year earlier.

In its financial report for the third quarter of 2014, which was released in mid-October, the company said competition from other mobile Internet companies had severely restricted the development of its traditional communications business.

Mobile messaging applications, such as Tencent Holdings Ltd's WeChat, has been steadily eroding China Mobile's revenue from voice and short massaging businesses. During the third quarter of 2014, short messaging usage on China Mobile declined by 20 percent, compared with a year earlier.

Xi Guohua, chairman of China Mobile, had earlier said that only content and applications can survive in the mobile era.

By launching the new media arm, China Mobile hopes to leverage its large user group of more than 800 million and its high-speed 4G network to transform Migu into a strong content provider, said Liu Xin, head of the new media company.

"We are going to expand our services to cover more devices, including mobile phones, iPads and personal computers, and offer Internet users the best digital experience whenever they want and wherever they are," he said.

Despite China Mobile's natural advantages in terms of user groups, as a late entrant in the content provision market, it may find it challenging to make Migu a big player, said Zhao Hailin, a telecom analyst at research firm IHS iSuppli.

"On the one hand, it needs heavy investment to buy copyrights for digital content, and on the other it has to team up with third-party distributors. I am not very optimistic for Migu to make revolutionary moves due to the State-owned operational culture it would inherit from China Mobile," he said.