Fitch: China's Telco Rate Changes Will Not Reduce China Mobile's Dominance:

Fitch Ratings says that China's latest cut in mobile interconnection rates will be insufficient to achieve its goal of creating a level playing field by redistributing profits from China Mobile to smaller operators.

Fitch believes that China Mobile will retain its strong market leadership position as we estimate that the proposed changes will reduce EBITDA by just 3%. The EBITDA of the second-largest operator, China Telecom, will likely rise by 3%. The ratings agency believes these changes in themselves will not be material to the companies' market positions and credit ratings, although China Mobile's ratings headroom will be reduced.

With effect from 1 January 2014, the mobile interconnection rate that China Telecom and third-largest operator China Unicom pay to China Mobile for most calls will be reduced to CNY0.04/minute. However, the rate that China Mobile pays to China Telecom and China Unicom will be maintained at CNY0.06/minute. In addition, the settlement rates for SMS and MMS would also be reduce to CNY0.01/message and CNY0.05/message respectively.

Fitch expects competition to partially offset the potential benefits to China Telecom and China Unicom, and put further pressure on China Mobile's profitability. The cut in the mobile interconnection rate payable by China Telecom and China Unicom will lower their average cost for voice traffic and may lure them to reduce tariffs to gain market share. In 1H13, the average mobile voice revenue per minute for China Telecom was CNY0.10, and CNY0.08 for China Mobile. However, Fitch does not expect a price war, as China Telecom and China Unicom focus more on mobile data than the traditional voice business.

Cross-platform Social Messaging Apps are Making Social Networking Increasingly Competitive:

The rise of cross-platform social messaging apps will increasingly threaten the influence and stickiness of conventional social networks in 2014 and beyond. ­ It is a potentially transformative trend that will see increasing numbers of app developers looking to re-orientate their social integration strategies to facilitate messaging and content sharing with communities outside of Facebook, Twitter and other more established social networks.

"Cross-platform social messaging apps have become hugely popular, particularly among younger demographics, and the leading services have continued to grow their user bases at impressive rates into what are now sizeable communities," said Canalys Senior Analyst Tim Shepherd. "It is important to understand that consumers are not using these services solely as a free-to-send alternative to SMS and MMS. They also are increasingly where users turn for group messaging, and for sharing photos, links and other content, and are the communities where their friends and contacts are most easily and verifiably reachable. While features vary, cross-platform messaging apps are essentially bare-bones social networks in their own right. It is reasonable to assume that as a user's social interaction and engagement with these services grows, it will often leave a correspondingly diminished level of engagement and interest in services such as Facebook. Social networking companies will need to respond to this competition with a renewed focus on the quality of the user experience they offer, and look to add value through feature innovations and enhancements, or else risk user attention being wholly or partially lured away."