‘Vir­tual’ era open­ing up for tele­com users, firms

Move will draw pri­vate cap­i­tal and in­ject new vi­tal­ity into in­dus­try

China Daily (Canada) - - BUSINESS - By SHEN JINGTING shen­jingt­ing@chi­nadaily.com.cn

The Min­istry of In­dus­try and In­for­ma­tion Tech­nol­ogy of­fi­cially is­sued the first group of li­censes for mo­bile vir­tual net­work op­er­a­tors on Thurs­day, al­low­ing pri­vate do­mes­tic com­pa­nies to of­fer repack­aged mo­bile ser­vices.

Ac­cord­ing to an an­nounce­ment on MIIT’s web­site, 11 com­pa­nies — in­clud­ing an In­ter­net ser­vice sub­sidiary of Alibaba Group Hold­ing Ltd, as well as e-com­merce gi­ant Bei­jing Jing­dong Cen­tury Trad­ing Co Ltd ( JD) and mo­bile phone re­tail chain store D.Phone Group — re­ceived mo­bile vir­tual net­work op­er­a­tor li­censes.

En­cour­ag­ing pri­vate cap­i­tal to en­ter the na­tion’s tele­com in­dus­try, the min­istry said, will in­ject new vi­tal­ity into the mar­ket and bring fur­ther pros­per­ity to the sec­tor.

At the same time, Chi­nese con­sumers will have more ser­vice choices and a bet­ter user ex­pe­ri­ence, the min­istry added.

“We will con­tin­u­ously ex­plore ar­eas in which do­mes­tic com­pa­nies can be fur­ther in­volved in China’s ba­sic tele­com ser­vice sec­tor,” said Miao Wei, head of the MIIT, at a Novem­ber meet­ing.

The MIIT won’t re­strict the to­tal num­ber of mo­bile vir­tual net­work op­er­a­tors through a two- year trial pe­riod end­ing on Dec 31, 2015, but com­pa­nies must sub­mit ap­pli­ca­tions by July 2014.

“Ev­ery qual­i­fied en­ter­prise can re­ceive per­mis­sion,” the an­nounce­ment said.

China has long con­sid­ered open­ing up its ba­sic tele­com ser­vices mar­ket, which in­cludes tele­com net­work op­er­a­tions, call ser­vices and broad­band con­nec­tions.

How­ever, State- owned tele­com car­ri­ers still have a tight hold on the mar­ket. Pri­vate com­pa­nies and for­eign en­ter­prises only have lim­ited busi­nesses fo­cus­ing on value-added tele­com ser­vices.

The MIIT pub­lished draft pro­pos­als on al­low­ing Chi­nese pri­vate com­pa­nies to buy mo­bile net­work re­sources from the na­tion’s three tele­com op­er­a­tors in Jan­uary this year.

The pro­pos­als be­came of­fi­cial pol­icy in May, al­low­ing pri­vate en­ter­prises to re­brand mo­bile ser­vices and sell them to cus­tomers un­der a two-year trial.

In an e- mail to China Daily, JD said it had signed strate­gic part­ner­ship agree­ments with China Uni­com (Hong Kong) Ltd and China Tele­com Corp Ltd. JD will build up its own tele­com ser­vices, in­clud­ing voice ser­vices, short mes­sages and mo­bile data pack­ages.

“JD aims to be­come China’s big­gest mo­bile vir­tual tele­com op­er­a­tor, or the fourth-largest tele­com car­rier af­ter China Mo­bile Ltd, China Uni­com and China Tele­com,” said Zhao Guo­qing, vice-chair­man of JD.

JD’s ad­van­tages, ac­cord­ing to Zhao, are that the com­pany has more than 140 mil­lion reg­is­tered users, mostly aged be­tween 23 and 45, who are the key con­sumers for mo­bile phones in China.

Alibaba said it aims to team up with all tele­com car­ri­ers and work in close col­lab­o­ra­tion with them to pro­vide the best telecom­mu­ni­ca­tions ser­vices.

In de­vel­oped economies such as the United States and Ja­pan, vir­tual net­work op­er­a­tors have legally ex­isted for a long time. Their par­tic­i­pa­tion di­ver­si­fies prod­ucts and ser­vices and helps lower cus­tomers’ costs.

Yang Guang, se­nior an­a­lyst with re­search firm Strat­egy An­a­lyt­ics, said tra­di­tional tele­com op­er­a­tors are set for both gains and losses.

New mo­bile vir­tual net­work op­er­a­tors “will com­pete with the three net­work op­er­a­tors di­rectly. This may ex­ert huge pres­sure on the re­tail ser­vices of all three Chi­nese op­er­a­tors,” Yang said.

But tele­com car­ri­ers can also lever­age the new op­er­a­tors’ dis­tri­bu­tion chan­nels, brands and cus­tomer re­la­tion­ships to de­velop new mar­ket seg­ments, Yang pointed out.

“In the long term, com­pe­ti­tion from and in­no­va­tions by MVNO play­ers will im­prove the per­for­mance of the mo­bile com­mu­ni­ca­tion mar­ket in China and ben­e­fit the whole in­dus­try chain, in­clud­ing net­work op­er­a­tors,” Yang said.

Be­ing the chal­lengers in the mar­ket, China Tele­com and China Uni­com should have stronger mo­ti­va­tion to co­op­er­ate with MVNO play­ers than China Mo­bile, ac­cord­ing to a re­port from Strat­egy An­a­lyt­ics.

China Mo­bile, as the mar­ket leader, looks a bit re­luc­tant to co­op­er­ate with MVNO play­ers. Ac­cord­ing to the MIIT, none of the 11 pri­vate com­pa­nies had signed agree­ments with China Mo­bile.

Li Jun, a spokesman for China Mo­bile, told China Daily that the com­pany is com­plet­ing co­op­er­a­tion ne­go­ti­a­tions with 17 do­mes­tic pri­vate com­pa­nies and is about to ap­ply for li­censes from the gov­ern­ment.

Cons i d e r i ng China Mo­bile’s am­bi­tious plans for TD-LTE de­vel­op­ment, the mo­bile vir­tual net­work op­er­a­tors, par­tic­u­larly those hav­ing strong dis­tri­bu­tion chan­nels, could also be an op­por­tu­nity to de­velop the TD-LTE busi­ness, an­a­lysts said. Meng Jing and He Wei con­trib­uted to this story.


Peo­ple try out mo­bile hand­sets at a store in Guangzhou, Guang­dong prov­ince. The gov­ern­ment is­sued li­censes for vir­tual net­work ser­vices to 11 pri­vately owned op­er­a­tors on Thurs­day.

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