The PAS system is built into the existing fixed-line network and lures customers with low per minute rates, one-way charges and cheap monthly fees, although the service area is restricted and there is no roaming between cities.

"We will develop Little Smart in accordance with government regulations so it complements existing fixed-line phones," said Wei Leping, general engineer of China Telecom Group.

"There is considerable potential for the development of Little Smart due to its low equipment cost and quick investment return," he said in an interview yesterday.

The company has expanded operations to many small and medium-sized cities, offering customers a cheaper alternative to normal mobile services.

Technically speaking, Wei admitted, Little Smart's lower quality voice transmission system cannot compete with GSM (global system for mobile telecommunication) and CDMA (code division multiple access) phones.

Nevertheless, Little Smart has turned out to be the favorite choice for low-end customers with its competitive fees.

Rates for Little Smart range from 0.1 yuan (1.2 US cents) to 0.2 yuan per minute compared with 0.40 yuan per minute for GSM phones.

Little Smart has become a life line for China's two biggest fixed-line carriers, China Telecom and China Netcom, which lack mobile phone licences, allowing the companies to enter the lucrative mobile telecommunication's market.

Both carriers have built Little Smart networks to provide wireless phone services to increase their revenue.

Competition has been hotting up among the four major telecom operators as China Telecom and China Netcom joined the fray by spending hundreds of millions of dollars to expand their own Little Smart systems earlier this year to compete with China Mobile and China Unicom, the country's only two mobile operators.

China Telecom has recruited about 12 million Little Smart subscribers so far and China Netcom's figures are around 3 million.

Little Smart service can be found in more than 400 cities across the country.

Regulators blocked such services from the major cities of Beijing and Shanghai last year, fearing excessive competition and price wars in the high-profile areas.

But early this month, regulators approved the nationwide launch of the service, allowing China Netcom to compete directly with mobile operators China Mobile and China Unicom in Beijing for the first time, leaving Shanghai as the only major Chinese city without the service.

Beijing Communication Corp, a subsidiary of China Netcom, launched the first Little Smart service in Huairou on the outskirts of Beijing on March 10.

Sources said Little Smart is going to be launched in May or June in Beijing's downtown areas around colleges and government office buildings.

There has been no immediate response from Beijing Communication Corp.

To defend their turf nationwide, China Mobile and China Unicom have begun to offer free and discounted incoming airtime in some regions of the country.

China Mobile and China Unicom stocks have sunk to multi-year lows in recent weeks, with the latest promotions likely to keep prices depressed for the near-term, they added.

Analysts said price competition is becoming more intense, and one-way charges are likely to emerge very soon.

(China Daily March 20, 2003)