Date
14 August 2018
China Unicom's strategic partnership with four internet firms offers a chance for the telecoms firm to develop a new business model. Photo: Bloomberg
China Unicom's strategic partnership with four internet firms offers a chance for the telecoms firm to develop a new business model. Photo: Bloomberg

Can China Unicom be reborn through its BATJ partnership?

Though China’s telecommunications sector remains under strict government control, the country’s No. 2 operator, China Unicom, has been stepping up efforts to move to a mixed ownership structure.

As part of the program, Unicom has forged an alliance with four internet giants, hoping to leverage the ties to establish a whole new business model, rather than remain content with just selling connectivity to users.

Last week, Unicom announced approvals for the appointment of new board directors, helping bring in top executives from Baidu, Alibaba, Tencent and JD.com, the so-called BATJ firms.

The expanded Unicom board now includes Lu Shan, a senior executive vice president of Tencent; Robin Li, the chairman and CEO of Baidu; Liao Jianwen, the chief strategy officer of JD.com; and Hu Xiaoming, a senior vice president of Alibaba.

Their appointment follows a move by Unicom to introduce Baidu, Alibaba, Tencent and JD.com as strategic shareholders as part of a mixed ownership reform.

Unicom has been under huge pressure from key competitors China Mobile and China Telecom, as the company failed to boost its market share in both the mobile and fixed-line segments.

China Mobile has been dominating the mobile market on the mainland for a long time. Meanwhile, latecomer China Telecom has been catching up with Unicom in terms of total mobile users.

In the fixed-line broadband business, Unicom is also challenged by China Mobile as the latter aggressively rolled out service on the back of China Teitong’s network.

From the consumer market perspective, Unicom is no doubt an underdog, and it is not easy for the firm to win back market share from rivals.

But now, the company hopes to improve the situation by taking advantage of its alliance with the four Chinese internet giants. 

Leveraging on the strategic partnership with BATJ, Unicom is in a good position to implement service fee reform by waiving all the data usage fees on specific applications, and also move in line with the government’s policy of “reducing service fees whilst boosting the network speed”.

For example, Unicom can provide “data-free” service plan for services like Weixin, online games, online shopping, video streaming and other related services provided by BATJ. With launch of such new service plans, the telecoms firm should be able to attract a number of youngsters.

When more users opt for such plans, Unicom can work out a revenue sharing model with its partners to create “win-win” situation for both sides.

If such free data plans are successful, rivals like China Mobile and China Telecom would also follow afterwards, which should benefit all mobile users in the market.

As a smaller player in the market, Unicom needs to streamline its business operation and prepare for completely online operations, especially as the Chinese government could launch mobile number portability to all users in 2020.

When across-the-board portability is in place, it could provide a great opportunity for Unicom to win users from China Mobile, helped by service innovation and technology support.

Drawing on the experience of Alibaba and Tencent in e-commerce marketplace, Unicom should quickly develop its own pure-online sales platform before the number portability launch, enabling customers to register and select service plans and have the SIM cards delivered quickly anywhere.

Right now, mobile users in rural or inland cities in China don’t have a real choice in terms of service providers, due to the lack of retail outlets other than those of China Mobile. The people are forced to join China Mobile services.

In this situation, if Unicom launches an online platform with the help of BATJ, it can help transform the telecoms firm’s operation and facilitate service subscriptions over the Internet.

Apart from the consumer market, Unicom can also seize opportunities in the enterprise market, drawing on the expertise of the Internet firms in big data analytics and cloud computing services.

Unicom has already teamed up with Alibaba’s Aliyun service in China to provide public cloud service to enterprises in a bid to tap the opportunity arising from new government rules which required that public cloud services should be provided by state-owned firms.

Also, Unicom’s Wo Cloud service is using Alibaba’s cloud infrastructure, something that should help the operator to strengthen its service offering as a whole.

Unicom’s alliance with the BATJ firms may not translate into concrete financial gains for the telecoms operator in the short term, but it can surely pave way for a host of new possibilities in the long run, helping the firm accelerate its growth with an innovative business model.

– Contact us at [email protected]

RC

EJ Insight writer

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