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News released Thursday indicated that the Chinese authority will respond to mounting public complaints by reducing roaming charges for cell phone usage. The cut is expected to range from 54% to 73%, and should dramatically boost roaming utilization rates. Currently users pay up to RMB1.50 (~US$0.21) per minute for roaming charges, approx. ten times the tariff for local calls.

While this reduction is expected to be put into effect by March 1st, China Unicom (NYSE:CHU) and China Mobile (NYSE:CHL) will be given a grace period up to May for this adjustment to kick in. Already, China Unicom is saying that this move may impact its revenues going forward.

What effect would this have on C.O.P. companies? I would like to look at Along Mobile Technology (OTC:AGMB) and Jingwei International (OTCPK:JNGW).

AGMB provides mobile value-added services such as ring tones, games, MP3s, videos and other entertainment applications to mobile users, who can download these through company-owned public terminals situated at malls, schools, airports, etc. This is a sector that has been badly squeezed by the carriers, as (i) there are many of these value-added providers, (ii) the telcos are increasingly creating these services in-house, and (iii) there is little competitive advantage that a value-added provider can gain over another. And while AGMB does have the advantage of a proprietary download network, it is not very scalable and currently not particularly successful.

Ultimately, I don't think the reduction in roaming charges will translate into a significant uptick in the amount of downloads, even though, because AGMB is not dependent on either China Mobile or China Unicom to disseminate its offerings, it is thus shielded from any adverse reactions from these 800 pound gorillas.

On the other hand, Jingwei deals directly with these carriers. I suspect the net effect of this will be positive to the company. Jingwei provides data mining services to these telcos, and in the latter companies' effort to create more value-added services, I suspect JNGW's role will be increased. For not only will there be greater pressure to offer higher-value services, there will be more data to be mined, as the reduction in roaming charges will definitely result in greater usage. I do see a direct correlation between Thursday's announcement and the increased need to employ data mining, and JNGW will be a beneficiary.

Ultimately, it is the consumer who will benefit, and that is clearly a good thing. As long as this move does not adversely impact the R&D dollar that goes into the sector, I think China's position as the most wired nation on Earth will not be undermined.

My Position: None.

Source: Along Mobile Technology, Jingwei: Implications of China's Slashed Roaming Charges