China Mobile is hoping to boost the popularity of its Fetion instant messaging (IM) service and take back market share lost to newer rivals.

Currently the sole operator of the service is Beijing Ultrapower Software, but China Mobile hopes that by opening it up to more operators the service can broaden its reach.

Public bidding for the operating rights was launched on April 12. Ultrapower will bid to continue operating the service as well, according to a statement issued on April 26 by the Shenzhen-listed company.

The move by China Mobile, the nation's largest telecom carrier by users, has been seen as an effort to take on more popular rival services, in particular the WeChat instant messaging tool owned by Tencent Holdings.

However, analysts have expressed pessimism about Fetion's prospects in the market.

Once mighty

Fetion was launched in May 2007. It allows users to send free text messages via China Mobile's network, and it soon became popular with young people, especially college students, who are used to communicating with friends and even teachers via short messages instead of phone calls.

"The service really saved me a lot of money. And my supervisors also prefer this to inform us of various school notices. Those who did not install the application will be charged 0.1 yuan ($0.016) for replying to a Fetion message," Wang Mingting, a 22-year-old student at Fudan University in Shanghai, told the Global Times on April 25.

But when WeChat came to the market in January 2011, Wang and her friends started to use that instead of Fetion.

"Fetion could only support free text messages, while WeChat allows us to send text and voice messages and even have Wi-Fi video chats," said Wang.

In recent years, Over The Top (OTT) services such as WeChat and Sina's microblog platform Weibo, which are provided over the Internet rather than via a telecom network, have been on the rise.

In the two years since its launch, WeChat has so far attracted more than 300 million users. By the end of March this year, China Mobile had 726 million subscribers, while China Unicom had 250 million users and China Telecom had 168 million. This means that WeChat has become effectively the second-largest telecom operator in China by number of users.

According to data released by the Ministry of Industry and Information Technology on January 24, a total of 897.3 billion short messages were sent via China's three telecom carriers in 2012, a 2.1 percent year-on-year increase, but a four-year low in terms of growth rate.

In response to this, China Mobile and the two other carriers are trying to restructure their IM tools, Xiang Ligang, a telecom expert and CEO of industry information portal cctime.com, told the Global Times on April 27.

China Telecom plans to cooperate with leading domestic Internet company NetEase, Inc in building up its Yiliao IM service, according to domestic news portal sina.com on April 2.

Telecom equipment maker Huawei Technologies Co and Hong Kong-listed software provider Chinasoft International Ltd have entered the bidding to operate Fetion, domestic technology news portal tech.qq.com reported on April 17.

China Mobile refused to comment on this when contacted by the Global Times Monday and said that it will reveal details of its plans at a proper time.

Not flexible enough

Like other Chinese students, Wang received a China Mobile SIM (Subscriber Identity Module) card from the school on the first day of enrollment in 2007. And the phone number was automatically registered for the Fetion service.

Fetion gained a large number of new subscribers in this way.

According to Analysys International, in the first two quarters of 2007, Fetion's share of the market in terms of users was too small to be calculated. But in the third quarter it leaped to fourth position in the domestic instant messaging industry.

However, China Mobile was not energetic in developing the functions of the service, which lowered users' loyalty to it, Liu Wenqi, a Shanghai software developer, told the Global Times on April 28.

In 2011, after over four years of development, Fetion was still unable to transmit free text messages via other telecom carriers' networks, unlike WeChat and other IM tools, which could also offer voice messaging services.

The company surely knew of its own failings in developing Fetion, but any new moves have to be approved by various departments before being put into practice, according to Xiang.

"China Mobile is too 'fat' to move as fast as Internet companies like Tencent," he noted.

Although an open tender will introduce competition, the rigid operating systems used by China Mobile are likely to continue blocking the development of Fetion, a 48-year-old Beijing-based industry insider surnamed Xu told the Global Times on April 25.

Xu has worked as a senior manager in one of the three telecom carriers for over 10 years and he said that Fetion will continue to decline.

Tough competition

Currently, China's telecom carriers are seeing the limits of their operating systems because of competition from market-oriented Internet firms, Han Jian, a Sichuan-based industry expert, told the Global Times on April 25.

But even though China Mobile can improve its Fetion service, it is hard to tell whether it can compete with WeChat, he said.

Clear product positioning is a more important concern for China Mobile at the moment, said Xiang, noting that the company's strategy for Fetion seems confusing.

According to the tender, the company will optimize Fetion's social networking services, as well as allowing it to enter other fields, including e-commerce, Android-based operating system development, and mobile applications.

China Mobile intends to enhance its presence in the overall mobile Internet industry via the restructuring, Zhang Qianshan, general manager of Ultrapower's strategic investment department, was quoted as saying by a Beijing-based newspaper on April 17.

However, this will not be easy, given that the domestic IM market has been seized by other firms.

According to data from consultancy firm iResearch, Tencent's other IM tool QQ had 220 million daily active users in March, accounting for 73.9 percent of the market, while Fetion's daily active users averaged 18 million, ranking third with a 6.2 percent share of the market.

Besides, Fetion's services are still not as developed as those from WeChat or IM services from other Internet companies, so it has no competitive edge, said Xiang.

Liang Jialing contributed to the story