Why China’s Three Major Telecom Operators Have Suspended “Zero-Cost Phone” Deals

September 27, 2026

China’s three major telecom operators — China Mobile, China Telecom and China Unicom — have suspended new applications for financial installment-based phone purchasing programs, bringing renewed attention to the popular “zero-cost phone” promotions once widely seen at telecom stores.

According to recent reports, starting September 24, China Mobile’s HeBao Credit Purchase, China Telecom’s Orange Installment and China Unicom’s Wo Installment stopped accepting new applications. Customer service representatives from all three operators have confirmed that the relevant products are currently suspended or undergoing upgrades. Existing customers are generally not affected, with their contracts continuing according to the original terms.

Are “zero-cost phones” really free?

For years, consumers in China have encountered promotions such as “get a phone for zero yuan” or “sign up for broadband and receive a free phone” at telecom stores.

On the surface, customers could obtain a smartphone without paying the full price upfront. In practice, however, some of these offers combined telecom packages with financial installment agreements.

Customers could sign a financing contract under which the cost of the phone was repaid over time, with the monthly repayment sometimes incorporated into their telecom bills.

In other words, “zero yuan” generally meant that consumers did not have to pay the full price immediately — not that the phone itself was completely free.

Consumer complaints have become a major issue

Installment-based phone purchases have generated recurring complaints in recent years.

China Central Television’s financial news program reported cases in which consumers believed they were simply signing up for telecom services or receiving a promotional phone, only to discover later that a consumer loan had also been opened in their name.

In some cases, consumers found that their monthly telecom payments included installments for phones or other equipment.

The issue is not installment payments themselves. Consumer financing is a common purchasing method.

The key question is whether customers are clearly informed that they are entering a financing agreement, including the total cost, repayment period, monthly payment and potential consequences of late repayment.

If a customer believes a phone is being given away for free while the actual transaction involves a loan, the potential for disputes becomes much higher.

When telecom services become linked to financial products

There was a clear commercial rationale behind installment-based phone promotions during the early smartphone boom.

Telecom operators could lower the upfront cost of smartphones while attracting customers to longer-term service packages.

But as the model evolved, some promotions increasingly combined telecom services with financial products.

That changed the nature of the risks involved.

A customer who failed to make a normal telecom payment might once have faced service suspension. Under a financing arrangement, however, the consequences can also involve a loan contract and potential credit-related issues.

China Central Television cited industry analysis saying that some offline sales channels had packaged financial installment products as “zero-cost phone” promotions in pursuit of sales targets, raising consumer-protection and compliance concerns.

A changing regulatory environment

The timing of the suspension has also attracted attention.

Public reports indicate that China’s Measures for the Administration of Online Marketing of Financial Products are scheduled to take effect on September 30, introducing requirements concerning the marketing of financial products, including restrictions on false or misleading promotional claims.

This creates a broader compliance context for the telecom operators’ decision to review their installment-based phone products.

However, the direct explanations publicly provided by the three operators have focused primarily on product upgrades, system optimization and service improvements.

It would therefore be inaccurate to describe the suspension simply as a direct government order to terminate all “zero-cost phone” promotions.

Why operators are less reliant on phone subsidies

Compliance is only part of the story.

China’s telecom market has also entered a more mature phase, changing the economics of customer acquisition.

In earlier years, operators could use handset subsidies and prepaid service packages to attract new subscribers and recover some of the initial costs through longer-term contracts.

The market environment has since changed. Mobile number portability has become established, lowering the barriers for consumers to switch operators, while the role of long-term contracts in retaining customers has also evolved.

Industry analysts cited by Chinese media argue that telecom operators’ core business remains communications services rather than handset sales. As handset subsidies bring greater marketing, compliance and after-sales costs, relying on heavily subsidized phones to attract customers has become less attractive.

The suspension, however, doesnotmean that telecom operators will stop offering discounted smartphones altogether.

“Suspending zero-cost phone financing” and “ending all phone promotions” are two different things.

Operators may continue to offer discounts, trade-in incentives, package benefits and other promotional programs, while financial products tied closely to telecom contracts may face greater scrutiny and restructuring.

What should existing customers do?

For consumers who have already signed up for a “zero-cost phone” or installment-based purchase, the current adjustment mainly concernsnew applications.

China Mobile has said that existing HeBao Credit Purchase contracts remain unaffected. Customer-service representatives for China Telecom and China Unicom have likewise indicated that existing arrangements continue under their original terms.

Existing customers should therefore not stop making payments simply because new applications have been suspended.

Instead, they should review their contracts and confirm the financing amount, repayment period, monthly installment, telecom package requirements and any costs associated with early termination.

Most importantly,a suspension of new applications does not automatically cancel existing contracts.

What does the end of “zero-cost phones” mean?

For consumers, the biggest change may be a shift away from marketing centered on the phrase “free phone.”

Instead of asking whether a phone costs zero yuan upfront, consumers may increasingly need to focus on the actual economics of the deal:

What is the phone’s actual price?

How much will be paid in total?

How much is being financed?

What is the monthly repayment?

How long must the telecom package remain active?

What are the costs of terminating the agreement early?

Only after answering those questions can consumers determine the real cost of an offer.

For telecom operators, meanwhile, the suspension may signal a broader adjustment to the traditional combination of handset subsidies, long-term service contracts and financial installments.

As China’s telecom market moves further toward a mature, subscriber-retention-oriented model, operators may place greater emphasis on network quality, pricing, customer service and digital products rather than heavily subsidized handsets.

The “zero-cost phone” promotion once served as a powerful customer-acquisition tool. Its current suspension reflects a changing balance between consumer protection, financial compliance and the economics of telecom competition.

For consumers, the most important question is no longer whether a phone is advertised as “free,” buthow much the entire deal actually costs after all contracts and payments are taken into account.