Competing With China Mobile (CHL), Alibaba And Other Private Companies To Enter Chinese Mobile Phone Market

on December 19 2013 12:33 PM
  • Alibaba April 2013
    Alibaba. Reuters
  • Jack Ma
    Jack Ma (front), the billionaire founder of Chinese e-commerce giant Alibaba Group, reacts before receiving an honorary doctorate on business administration at the University of Hong Kong of Science and Technology in Hong Kong. REUTERS/Bobby Yip
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China’s mobile phone landscape, long partitioned into the big three state-owned enterprises, may experience a major shakeup in the coming year as high-profile tech giants in the private sector like Alibaba’s Jack Ma are invited to start phone companies.

This year, Chinese leaders made the unprecedented proposal to allow private companies to use the mobile networks of the big three domestic telecommunications companies -- China Mobile (NYSE:CHL), China Unicom Limited (NYSE:CHU) and China Telecom Corporation Limited (NYSE:CHA) -- as an effort by the government to cut prices and promote high-speed networks in the world’s largest wireless market, Bloomberg reported on Thursday.

The potentially lucrative opportunity prompted enterprising tech companies like Suning Commerce Group, a major electronics retailer, and Ma’s Alibaba Group to seek a license.

Allowing private players to challenge state carriers, a move aligned with the government’s Third Plenum commitment to allow markets to play a decisive role, may lead to price cuts, more choices in service plans and better customer service for subscribers of China’s 1.2 billion wireless accounts.

“The benefits could come on the front end, that is, through better service and an increased range of options for consumers,” said Bertram Lai, a Hong Kong-based analyst with CIMB Securities Ltd, according to Bloomberg. “Consumers may benefit from being able to have their phone service from a more proactive organization that caters specifically to their needs.”

New entrants to the market can expect to capture about 10 percent of China’s mobile-phone connections by 2018. The Ministry of Industry and Information Technology said in May that private companies may submit applications for two-year trial ending in Dec. 2015, and licenses to resell wireless capacity to consumers may be issued as soon as this month.

Retailers could lease spectrum from the big three, and package the handsets with wireless services to target the millions of migrant workers who travel from their rural homes to jobs closer to cities, said Nicole McCormick, an analyst at research firm Ovum. Bills will only decrease by a maximum of 3 percent, however, said Ricky Lai, a Hong Kong-based analyst at Guotai Junan International Holdings Ltd., according to Bloomberg

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