The interoperability of short messaging services between "Xiaolingtong" wireless phones and GSM (global system for mobile communications) or CDMA (code division multiple access) mobile phones is about to be launched this month, though the exact timetable is yet to be set.

"We are conducting trial use for the service between Xiaolingtong phones and GSM phones right at the moment and it is reaching the final stage," Tang Liuming, an official with Beijing Communication Corp, a subsidiary of China Netcom Communication Group Corporation, said in an interview with China Daily.

He said its parent company China Netcom is in negotiation with China Mobile to announce the interoperable service very soon.

"The service will be a nationwide promotion activity to boost the existing Xiaolingtong service," he said, but refused to give further details.

Rumor has it that the interoperable service will be unveiled this month to give a strong shot in the arm to further boost development of Xiaolingtong.

Xiaolingtong, also named "Little Smart" or PHS (personal handset service), is built on existing fixed-line networks and lures users with low per minute rates, one-way charges and cheap monthly fees.

Now, many Beijing Xiaolingtong subscribers are able to send short messages to GSM phone users.

Sources close to the Beijing Mobile Co said its "Gotone" GSM subscribers have to pay 0.2 yuan (2.4 US cents) for sending each short message to Xiaolingtong users. Other users - such as pre-paid service users - have to pay 0.15 yuan (1.8 US cents) for the service.

On the other hand, the price for Xiaolingtong subscribers sending to Beijing Mobile's subscribers is set at 0.1 yuan (1.2 US cents) each message.

According to Beijing Unicom, its subscribers have to pay 0.15 yuan (1.8 US cents) while sending a short message to Xiaolingtong users. The price for Xiaolingtong users sending a short message to Beijing Unicom's subscribers is set at 0.1 yuan (1.2 US cent).

"The connection of short messaging services between Xiaolingtong and GSM and CDMA phones will definitely further popularize Xiaolingtong services," said Yang Qing, deputy director of the TeleInfo Institute of the Chinese Academy of Telecoms Research of the MII.

Government figures show that the two fixed-line operators recruited about 64 million Xiaolingtong subscribers by the end of last year.

Both China Telecom and China Netcom, who do not have mobile licenses, spent hundreds of millions of dollars last year on Xiaolingtong as the service is designed to counter China Mobile and China Unicom.

By the end of November last year, Little Smart phone service was operating in 355 cities in the country's 31 provinces, municipalities and autonomous regions.

"There is still market potential for the development of Xiaolingtong, though the growth rate will gradually slow down," Yang said.

"However, as the Chinese Government is soon to roll out its 3G strategies, Xiaolingtong is unlikely to continue its high growth momentum," she said.

According to the government blueprint, both China Telecom and China Netcom are likely to obtain a 3G mobile phone license when the country kicks off its 3G strategies.

As a result, operators will shift their focus to 3G related development starting next year.

"For Xiaolingtong services, to enhance value-added services should be the top priority to generate new profits as Xiaolingtong is now gradually losing its advantage of providing cheap rates as it is exposed to frequent price wars," said Dai Chunrong, an analyst with China Securities in an earlier interview.

She said she believed that for Xiaolingtong equipment providers such as UTStarcom, ZTE Corporation and Lucent Technologies Qingdao, to enhance the design and function of Xiaolingtong phones as well as enhance research and development is a must for them to maintain their position in the Chinese market and overseas markets.

According to UTStarcom's preliminary financial results for the fourth quarter 2004 last week, it expects to report fourth-quarter revenues in the range of US$740 million to US$745 million, versus initial predictions of US$875 million to US$885 million.

"Clearly we are disappointed with our performance in China this quarter," said Hong Lu, chief executive officer and president of UTStarcom in a company statement.

"The primary reason behind the lower than expected financial results was the challenging market environment that UTStarcom faced in the region."

UTStarcom's revenues from China operations were adversely affected by several factors, including maturation of the PHS market, and decreased capital spending.

(China Daily January 12, 2005)