Major carriers turn to Internet innovation

A robot designed by using China Telecom's 4G network to entertain and serve blind and elderly people on display at an IT expo in Nanjing, capital of Jiangsu province, in July. [Photo/China Daily]

With a 450,000 workforce, China Telecom also has the luxury of numbers on its side. But there are other down-to-earth business reasons behind the decision.

As the country's "big three" carriers struggle with declining revenue from text messaging and voice calls, they are coming up with new ways to push growth.

One solution has been to awaken the entrepreneurial spirit in employees, illustrated by China Telecom's policy.

"Rising competition from Internet firms that offer instant messaging services has eaten into the revenue of text messaging and voice calls," Xiang Ligang, an independent telecom analyst and founder of the industry website cctime.com, said.

"These were two major revenue sources, so the telecom companies are now looking at other ways to make money by encouraging innovation."

Overhauling the existing business model had to happen, according to Xi Guohua, former chairman at China Mobile Ltd, the largest telecom carrier in China with 823 million subscribers.

He said in August that revenue from text messaging and voice calls had been declining at an annual rate of between 15 and 20 percent in the past several years.

Although the figures were slightly better in the first nine months of 2015, China Mobile still reported that "voice call duration" shrank by 1.2 percent and text messaging declined by 6.4 percent.

It was a similar story at China Telecom and China Unicom (Hong Kong) Ltd.

Naturally, the big three players have been moving into other areas to stem the tide, including what is known as Internet-enabled services, which involve online music streaming and gaming.

Last month, China Unicom announced it would invest 3.3 billion yuan into a 110,000-square-meter innovation center in Guangzhou, Guangdong province. The aim is to help nurture Internet-enabled companies. "We will offer storage services, big data analysis, marketing and channel resources as well as financial investment," Li Han, who is in charge of the Internet business at China Unicom's Guangdong branch, said.

China Mobile is also moving in the same direction. In May, it established a 2.55 billion yuan fund with State Development and Investment Corp and a fund management firm. The new company will invest in rapidly growing or mature mobile Internet businesses. China Mobile has pumped 1.5 billion yuan into the venture.

"Telecom operators are investing in startups because they need to innovate," Xiang at cctime.com said. "They hope to do that by funding enterprises in this mobile era."

China Mobile is also refining its existing operation. Earlier this month, it set up an Internet division, literally translated as China Mobile Internet Co.