Date
17 December 2017
The entry of new players in China's mobile market is expected to bring down service fees for customers. Photo: Bloomberg
The entry of new players in China's mobile market is expected to bring down service fees for customers. Photo: Bloomberg

The game-changing promise of new mobile entrants

Mobile phone services are expected to cost much less in China later this year as more than 20 mobile virtual network operators enter the market.

The Ministry of Industry and Information Technology, the nation’s telecoms watchdog, will soon unveil the names of the third batch of successful MVNO applicants, which could bring the total to more than 40.

MVNOs lease wholesale access to wireless networks and use it to offer their own mobile services to customers. Overseas, they account for about 2 percent of total mobile service revenue. That share of sales on the mainland would be equivalent to 30 billion yuan out of the 1.16 trillion yuan in total revenues last year — a big potential pie for the newcomers.

This promises to be the biggest breakthrough in the nation’s telecoms market. The entry of private firms will expand the field from three state-owned mobile operators to 40 MVNOs, even though the new entrants will just resell network capacity leased from the big three operators.

China has already given the MNVO go-ahead to 19 private firms, including e-commerce firms Alibaba Group Holding and JD.com, and traditional retailers Gome (00493.HK) and Suning (002024.CN). But internet firms Tencent Holdings (00700.HK) and Baidu Inc. have not applied.

Suning has submitted 18 different service plans for regulatory approval, of which the entry-level plan is priced at 8 yuan per month for 80 voice minutes, 180 MB of data usage and 8 hours of WiFi. Some packages will include 1GB of data usage for a specific app like online video sites, which should help users avoid phone bill shock.

But some mobile network operators have put limits on MVNOs. China Telecom (00728.HK), for example, only allows MVNOs to resell its service plans. In contrast, China Unicom (00762.HK) lets operators to select the resources they need and bundle their own plans, giving MVNOs room to innovate.

The market is watching how Alibaba will use its MVNO services to narrow the gap with Tencent in mobile internet. Some expect Alibaba to push its own Aliyun OS with its mobile service packages, as well as bundle its wide range of shopping services with its upcoming offering. It’s new stake in messaging app Tango, together with its Laiwang social app, should pave the way for the company’s MVNO service.

Some market watchers were surprised that Tencent did not apply to be an MVNO. Tencent’s over-the-top instant messaging product WeChat already has hundreds of millions of users, and a good relationship with carriers is crucial to the platform’s smooth operations. Some suggest that Tencent could trigger retaliation if it gets into the MVNO arena too, meaning that the status quo could be Tencent’s best option for now.

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SK

 

EJ Insight writer

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