China looks at opening competition in mobile telecom industry

A proposed regulation would open up trials for Chinese firms to become mobile virtual network operators

China is considering starting trials for mobile virtual network operators (MVNO), allowing qualifying private companies to resell wireless services in the country, with analysts expecting the move to eventually bring more competition to the state-controlled telecom sector.

The trials were proposed by China's Ministry of Industry and Information Technology on Tuesday. The goal is to bring more private capital to the telecommunication industry, foster innovation, and explore how MVNOs can partner and compete with China's established mobile carriers.

Wireless services are currently provided by China's three state-controlled telecom operators, the largest being China Mobile with over 700 million customers. But with the trials, qualifying Chinese private firms could buy and resell the wireless services under their own brand names.

The ministry is currently seeking public input on the proposal over a 30-day period. If enacted, the trials are set to last for two years.

China is a massive market, with more than a billion mobile subscribers. The vast size of the customer base means there's "plenty of room" for niche MVNOs to develop alongside the country's state-controlled mobile operators, said Nicole McCormick, an analyst with research firm Ovum.

Vincent Fu, an analyst with research firm Gartner, also expects the trials will eventually lead to more competition in China's mobile telecommunication space. But so far the details in the draft regulations are limited, and its unclear whether the MVNOs will face any restrictions in the services they can offer.

"Internet companies in China will have some interest in joining the trials," Fu said. "Currently, the mobile carriers haven't been able to meet all the different market segments, such as high-end enterprise users, who want better services."

Major players interested in the trials could include Chinese telecommunication equipment supplier Huawei, a builder of handsets and provider of enterprise communication products. Chinese Internet firms such as online messaging and gaming provider Tencent and e-commerce giant Alibaba Group may also want to join, given that the companies are increasingly devoting resources to mobile apps and services.

"China doesn't have as much competition, so there will be some space for companies to compete in," Fu added.

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