China Mobile is shifting its marketing efforts to non-contract devices and is also restructuring its smartphone postpaid packages, following pressure from the government to reduce subsidies.

Indicating how China Mobile’s focus is moving to mass-market devices, Chairman Xi Guohua said last week at a Global TD-LTE Initiative (GTI) meeting that the “market performance of mobile phone sales will depend on the cost performance”, Chinese news portal C114.net reported.

China’s largest operator, with some 790 million connections, spent CNY15.3 billion ($2.48 billion) on subsidies in H1 and will slash that to just CNY5.7 billion in H2. It spent CNY34 billion last year.

The cuts come after the country’s Assets Supervision and Administration Commission instructed the country’s three state-owned operators to cut subsidies by a combined CNY40 billion over the next three years.

The reduction won’t affect the company’s annual goal of selling 100 million 4G handsets, C114.net said. It quoted China Mobile General Manager He Ning as saying the monthly sales of 4G mobile phones was 6.5 million before July and this figure is expected to hit 10 million per month soon.

The operator has said 700 4G models will be available by the end of the year, 500 of which are priced at the CNY1,000 ($162) level.

Meanwhile, Bloomberg reported that China Mobile will now offer customers credit for voice packages instead of direct device subsidies.

Unlike in many markets where a customer pays a very low upfront price for a smartphone, China Mobile subscribers pay nearly the retail price but receive a monthly rebate for the duration of the two-year contract. Now customers will receive a monthly discount on voice services – so while not technically a subsidy, it lowers the price of the handset.

The news agency, using the iPhone 5s as an example, said the upfront cost of the phone will drop by about $130 for its top-end plan, but the monthly discount would be lower than the rebates given before, so the cost of the phone would almost double to $200 – which is still considerably subsidised.