Telecoms Market by Licensing Private Players

DOU SHICONG

(Yicai Global) Jan. 25 — Chinese authorities will soon start issuing business licenses to virtual network operators, a strategy aimed at scaling back the dominance of the big three state-owned telecoms firms by giving private players greater market access.

The plan follows a successful four-year pilot project that included 42 private companies — including tech giants such as Alibaba Group Holdings Ltd., JD.Com Inc. and Suning Commerce Group Co. — across 200 local networks in 29 provinces and cities across the country, according to a draft paper issued by the industry and information technology ministry.

All qualified companies, including foreign-invested ones, can apply for a license, according to Chen Jiachun, a senior official with the ministry.

The government is seeking to inject new blood into the country’s telecoms sector, which is dominated by China Mobile Communications Corp., China Telecom Corp. and China United Network Communications Ltd., better known as China Unicom.

Virtual network operators are carriers that do not own infrastructure, but are permitted to use telecoms networks, and resell these services through their own channels. User numbers for VNOs exceeded 60 million as of the end of last year, with total investment surpassing CNY3.2 billion (USD500 million).

In the pilot project, Alibaba, JD.Com and Suning each set up their own operators. The trial was successful in resolving issues related to channel interoperability, resource allocation and price arrangements between VNOs and telecoms operators. The draft paper states the need for extra work on issues including real-name verification and user data security.