Battles on the mobile front

But companies scratch their heads over how to profit from new voice-mail developments

BEIJING - Chinese telecom operators are competing for users of mobile audio instant messaging (IM) services because Internet companies such as Tencent Holdings Ltd and Shanda Interative are gradually eating into carriers' text message profits through various applications.

China Mobile Ltd, the world's biggest telecom carrier by subscriber number, announced in September that it had released the public beta testing version of Feiliao, the successor to China Mobile's Fetion mobile IM platform.

Feiliao, which means "flying chatting" in Chinese, is able to send and receive voice messages through mobile phones. China Mobile's version of the Kik-like service is based on Fetion and can help users to automatically add friends from Fetion. Kik Messenger is a real-time instant messenger application for mobile phones released in October, 2010 by Canada-based Kik Interactive Inc.

Before that, China Unicom (Hong Kong) Ltd, launched its first mobile IM product, Woyou, in August, while China Telecom Corp Ltd, brought out its mobile IM tool, Yiliao, in October. Both the products support voice messaging and are open to all Chinese mobile users. They can be downloaded from app stores and cost nothing other than Internet access to use, unlike standard short-messaging systems.

"Telecom carriers are acting defensively to protect their interests after similar services introduced by Internet companies affected operators' text message and multimedia message businesses," said Sun Xiaofei, an analyst with Samsung Economic Research Institute Beijing Representative Office. Sending an audio message by phone incurs a delay of just a few seconds.

The war began around one year ago when Xiaomi Technology Co Ltd, a mobile phone maker set up by Chinese Internet guru Lei Jun, offered Miliao in China. Miliao enables people to have a near real-time conversation on smartphones similar to Kik messenger in Canada.

Tencent, China's biggest Internet company by sales, quickly followed and launched its own voice mobile IM product, Weixin. Others that have joined the race include social networking company Kaixin001's Feidou, and Shanda Interactive's Youni.

"The text message business contributes more than 60 billion yuan ($9.38 billion) in revenue to operators every year. However, IM tools such as Miliao and Weixin connect people in real time and are charged by Internet data traffic. That diminishes the profits of the carriers' message businesses," Sun wrote in a research note.

Tencent said its Weixin service had already attracted 50 million users by the end of November, nearly a year after its release.

Jeff Xiong, Tencent's chief technology officer, said data services on mobile phones will inevitably become the mainstream as the third generation network develops.

"The short message service is likely to be replaced by data services - not only by Weixin, but also by more than 10 similar services currently available for users," he said.

The company has increased the number of employees on its Weixin team from about 10 to 80 within a year, and will intensify its investment in the service, hoping to make it a major application among Tencent's mobile Internet portfolio in two to three years, Xiong said. He added that the company doesn't exclude the possibility of making money from Weixin although the service doesn't have a clear way to generate revenues at present.

Among all instant messaging (IM) services on mobile phones, Tencent's QQ application had the most active users, accounting for 52.8 percent of the total, followed by Fetion's 30.5 percent in the third quarter, according to domestic research company Analysys International. The Kik-like services had a tiny share of the market, with Weixin getting 2.7 percent of all active users, ranking a distant fifth, and Miliao's 0.9 percent in sixth place.

However, the researcher said that this kind of service is likely to change the landscape of the IM market on mobile phones because, with their distinctive features, an increasingly large number of people have started to use them.

"Feiliao is a critical part of China Mobile's 'Fetion plus' converged communication platform," said Hang Guoqiang, the general manager of the data business operation center at China Mobile, speaking at the China Mobile Global Developer Summit held in Guangzhou in December. He pointed out Fetion has more than 500 million registered users and the whole platform will play a strategic role for China Mobile when it enters the mobile Internet era.