Sometimes it seems like I’m living in slow motion when I write about China telecoms, since major developments in the sector often drag on for months past their expected launch dates. That’s been the case for 3 major new initiatives that could inject important new life into the space, even though rumored launch dates for all 3 have passed numerous times. The latest news bits on all 3 indicate things are still moving ahead, meaning perhaps we will someday soon see the announcement of licenses for 4G mobile service and new virtual network operators (VNOs), as well as the launch of a new national broadband network operator.
Anyone who works in China’s telecoms sector should be extremely patient, since the nation’s telecoms regulator is notoriously slow at rolling out new initiatives. After months or even years of buzz, many were expecting the Ministry of Industry and Information Technology (MIIT) to award VNO and 4G licenses in October, which never happened.
VNO licenses will create 6-12 new telecoms carriers by letting them lease network capacity from the big 3 state-owned telcos. The advent of 4G will significantly boost data transmission speeds over mobile networks, making functions like video streaming and downloading of big data files much easier. Lastly, the creation of a new national broadband network by consolidating China’s many regional cable TV providers into a single company would provide important new competition for China Unicom (HKEx: 762; NYSE: CHU) and China Telecom (HKEx: 728; NYSE: CHA), which currently operate a duopoly in the space.
Let’s start with the latest developments in the VNO story, which has been in and out of the headlines for about a year now. Under the scheme, the MIIT has asked the big 3 state-run telcos to compile lists of potential VNO partners. The MIIT would then presumably choose 2-4 finalists from each of those lists to get VNO licenses. Now media are reporting that Unicom has submitted a list of 9 potential partners (Chinese article), and China Telecom has submitted 16. (English article)
Many of the names have been rumored now for the last month or 2, and the final lists include such partners as retailers Suning (Shenzhen: 002024), Gome (HKEx: 493) and Jingdong. But the fact that the big 3 telcos have submitted their nominees means the process is indeed moving forward. Knowing how slowly the MIIT moves, it could take another few months to review all the candidates, meaning we probably won’t see licenses awarded until the first quarter of 2014 at the earliest.
Moving on, the major new development in 4G is media reports that the MIIT will now issue its first batch of new 4G licenses on December 18. (Chinese article) There’s not much more to say about this development, which comes after another rumored date in late September came and went without any announcement. Leading telco China Mobile (HKEx: 941; NYSE: CHL) has ignored the delays and is already aggressively pre-marketing 4G service. But it may have to wait another month or more before it can finally start offering actual service plans.
Finally let’s look at the national broadband network, which has been talked about for at least the last 5 years but finally gained some momentum about 2 years ago. Now media are saying the new national network may be nearing a launch, and that China Mobile may be one of its investors. (Chinese article) The most interesting news here is China Mobile’s potential involvement. China Mobile had previously lobbied heavily to be allowed to invest in the new operator, since it was the only one of the big 3 telcos without a fixed-line broadband network.
But the MIIT had reportedly rebuffed those requests. This latest news means the MIIT may have changed its mind, potentially giving China Mobile access to a major new national broadband network. That could provide a valuable source of new business for China Mobile, and also much-need competition for Unicom and China Telecom in the fixed-line broadband space.
Bottom line: The MIIT may issue 4G licenses before the end of the year, but VNO licenses are unlikely before the first quarter of 2014.