Move will draw private capital and inject new vitality into industry
The Ministry of Industry and Information Technology officially issued the first group of licenses formobile virtual network operators on Thursday, allowing private domestic companies to offerrepackaged mobile services.
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People try out mobile handsets at a store in Guangzhou, Guangdongprovince. The government issued licenses for virtual network services to 11privately owned operators on Thursday. LU HANXIN / XIN\HUA
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According to an announcement on MIIT's website, 11 companies — including an Internet servicesubsidiary of Alibaba Group Holding Ltd, as well as e-commerce giant Beijing Jingdong CenturyTrading Co Ltd (JD) and mobile phone retail chain store D.Phone Group — received mobilevirtual network operator licenses.
Encouraging private capital to enter the nation's telecom industry, the ministry said, will inject newvitality into the market and bring further prosperity to the sector.
At the same time, Chinese consumers will have more service choices and a better userexperience, the ministry added.
"We will continuously explore areas in which domestic companies can be further involved inChina'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 trialperiod 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 includestelecom network operations, call services and broadband connections.
However, State-owned telecom carriers still have a tight hold on the market. Private companiesand foreign enterprises only have limited businesses focusing on value-added telecom services.
The MIIT published draft proposals on allowing Chinese private companies to buy mobilenetwork resources from the nation's three telecom operators in January this year.
The proposals became official policy in May, allowing private enterprises to rebrand mobileservices 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 ChinaUnicom (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-largesttelecom 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 registeredusers, 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 withthem to provide the best telecommunications services.
In developed economies such as the United States and Japan, virtual network operators havelegally existed for a long time. Their participation diversifies products and services and helpslower customers' costs.
Yang Guang, senior analyst with research firm Strategy Analytics, said traditional telecomoperators are set for both gains and losses.
New mobile virtual network operators "will compete with the three network operators directly. Thismay 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 andcustomer relationships to develop new market segments, Yang pointed out.
"In the long term, competition from and innovations by MVNO players will improve theperformance 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 strongermotivation to cooperate with MVNO players than China Mobile, according to a report fromStrategy 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 ChinaMobile.
Li Jun, a spokesman for China Mobile, told China Daily that the company is completingcooperation negotiations with 17 domestic private companies and is about to apply for licensesfrom the government.
Considering China Mobile's ambitious plans for TD-LTE development, the mobile virtual networkoperators, particularly those having strong distribution channels, could also be an opportunity todevelop the TD-LTE business, analysts said.
Meng Jing and He Wei contributed to this story.