Telecom giant to launch Internet firm, branded mobile phones

China Mobile hopes to break into new fields

China Mobile, the country’s largest mobile operator, confirmed on Wednesday that it is preparing to set up a mobile Internet company, as well as develop its own self-branded mobile phones.

Speaking at the China Mobile Global Developers Conference 2012 in Guangzhou, Guangdong province, Chief Executive Officer Li Yue said, “We need to change the operating model of being a traditional State-owned company to help us break into new fields and create new products and services.”

Being run as a separate business would allow a mobile Internet company to compete better, said Li, as it would be more responsive to changing markets and be able to overcome geographical boundaries in the domestic market.

He didn’t specify when the new company might be launched.

Rumors had been circulating that China Mobile was considering a major restructure of its mobile Internet businesses.

The company has built nine different businesses based in various Chinese cities from 2006 — including a wireless music base in Chengdu, Sichuan province, and a mobile video base in Shanghai — to produce different types of content and develop effective individual business models.

The new mobile Internet company will be set up along the same lines as its current Internet operation, and be based in Guangzhou, according to sources at China Mobile.

Though China Mobile was a front-runner in terms of building specific business units, China Telecom Corp Ltd, the nation’s smallest wireless operator but still its biggest fixed-line operator by revenue, has stepped up its efforts with several companies, dedicated to developing mobile Internet content.

Tv189.com, a mobile video subsidiary of China Telecom, for instance, has already attracted external investors and is estimated to be worth 1.9 billion yuan ($305 million) after becoming a standalone company in March 2011.

Xiao Wei, general manager of China Telecom’s digital publication business, read.189.cn, said in a recent China Business News interview that running as a separate company structure means it has “more freedom, relatively independent operation, and should be selffinancing”.

Zeng Jianqiu, a professor at Beijing University of Posts and Telecommunications, said that Chinese telecom operators are under growing pressure to transform, because of the constantly changing industry landscape.

Zeng added that the emerging mobile Internet market is a convergence of handset manufacturers and the Internet industry, which will be working on narrow margins, because the traditional profit streams of telecom businesses, such as voice and text messaging, will be squeezed.

“To compete with those market-oriented Internet companies, State-owned telecom carriers will have to go through some big reforms,” Zeng said.

Meanwhile, revealing China Mobile’s plans to develop its own self-branded mobile phones, Li said he would not be looking to compete with other mobile vendors.

He took US-based WalMart Stores Inc as an example of how some companies sell other producers’ merchandise, while also providing customers with products sold under their own brand.

“China Mobile will deliver added-value products, based on our resources,” Li said.

China Mobile announced in July that it had successfully developed the first TDSCDMA 3G mobile phone supporting Near Field Communication technology, or wireless communication technology with a very short range.

Other Chinese Internet companies, including Baidu Inc, Alibaba Group and Qihoo 360 Technology, have already launched self-branded smartphones.

Analysts have pointed out that by launching their own mobiles, companies can embed their Internet services into the devices, creating closer ties with customers.

Li confirmed China Mobile is expecting to cooperate with Apple Inc.

“Apple is one of the greatest terminal manufacturers in the world. We started making contact in 2007,” Li said.

“China Mobile and Apple still have to solve many issues, such as the business model, articles of cooperation and revenue division, but I believe we will reach an agreement eventually,” Li added