China has taken a significant step towards creating an even playing field for the nation’s top telecoms service providers by allowing China Mobile to operate fixed-line networks across the nation and granting fourth-generation (4G) mobile licenses to all the three carriers.
The long-awaited initiative, announced on Wednesday, reinforces the view that Beijing is determined to boost competition in the sector and let market forces play a bigger role in shaping the future of the state-owned firms, putting an end to the era of hand-holding and a sheltered policy environment.
According to a statement from the Ministry of Industry and Information Technology (MIIT), authorities have issued 4G licenses for the TD-LTE standard to the parent entities of all three major carriers — China Mobile Ltd., China Telecom Corp. and China Unicom Ltd. At the same time, it was also announced that China Mobile has been granted permission to step into the fixed-line network market, which is currently dominated by China Telecom.
As of now, China Mobile does not operate any fixed network business. A sister entity, China Tietong, a wholly-owned subsidiary of China Mobile Communications Corp., has some operations in the segment, while the group overall has been focused on the development of the homegrown TD-SCDMA mobile network standard.
Given the restrictions, China Mobile has not been able to leverage its market dominance in the mobile sector to gain a foothold in the fixed network market. The previous market structure also offered a comfort zone for China Telecom and China Unicom to boost their 3G mobile business, helping them narrow the gap with China Mobile.
After more than three years of development, China Mobile, China Telecom and China Unicom account for 45 percent, 25 percent and 29 percent share respectively in the 3G market. That compares with more than 60 percent share enjoyed by China Mobile in the overall mobile market due to its dominance in the 2G segment.
Under official guidance, the two smaller players have successfully narrowed the gap with China Mobile in the mobile battlefield, while also extending their competitive advantage in broadband network infrastructure under the government’s “Broadband China” policy that aims to boost network penetration in the country.
Given this backdrop, the government had no reason to prevent China Mobile from building its own broadband network to compete with China Telecom and China Unicom. The new arrangement can provide a level playing field for the first time for all three state-owned operators to compete in the market. It will also enable all players to offer bundled packages to lure customers.
While China Mobile is seen as the big winner after the latest policy initiative, the company will however need to make huge investments to build a good broadband network and lure customers from China Telecom and China Unicom.
Broadband infrastructure is playing an important role in the deployment of 4G mobile networks as internet traffic is soaring due to growing use of devices such as smartphones and tablets. China Mobile can build a data transmission network for its own use, rather than rent the infrastructure from rivals. That would ensure good network quality for its services in the long run.
Beijing’s reforms will help all the three state telecoms firms become full service operators. Meanwhile, the entry of mobile virtual network operators is expected to bring in private capital into the industry. Having a nationwide fixed network operation would be some compensation for China Mobile as it contends with a more open market landscape.
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