China Mobile will not be materially affected by lower mobile interconnection fees coming into force on 1 January 2014, according to Fitch Ratings.

Big operators usually have the most to lose through lower interconnect fees – more calls are terminated on larger networks than smaller ones – but Fitch reckons the reduction in charges 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, estimating the changes will reduce the company’s EBITDA by just 3 per cent.

The EBITDA of the third-largest mobile operator, China Telecom, is projected to rise by 3 per cent.

“We believe 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,” said Fitch in a statement.

Fitch reports that the new mobile interconnection rate China Telecom and China Unicom (China’s second-largest mobile operator) pays China Mobile will be reduced from CNY0.06 ($0.001) to CNY0.04 per minute for most calls.

However, the rate China Mobile pays China Telecom and China Unicom is maintained at CNY0.06 per minute.

Settlement rates for SMS and MMS are reduced to CNY0.01 and CNY0.05 per message respectively.

Fitch expects stiffer competition to partially offset the potential benefits to China Telecom and China Unicom (and put further pressure on China Mobile’s profitability).

The ratings agency said the cut in mobile interconnection fees payable by China Telecom and China Unicom will lower their average cost for voice traffic, which might persuade them to lower their tariffs to gain market share.

The average mobile voice revenue per minute for was CNY0.10 for China Telecom during 1H 2013, and CNY0.08 for China Mobile.

However, Fitch said it’s not expecting a price war since China Telecom and China Unicom are focused more on mobile data than traditional voice.

Fitch further forecasts that China Mobile’s revenue growth will slow, and profitability will remain under pressure due to intensifying OTT substitution.

During 1H 2013, Fitch reported that China Mobile still received 69 per cent of its revenue from traditional voice and SMS services, which tend to command higher margins but have higher substitution risk.