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China – Government Licenses Private Entities As Mobile Virtual Network Operators.

6 January, 2014
Legal News & Analysis – Asia Pacific – ChinaTMT

 

With the goal of spurring competition and consumer choice in the Chinese wireless sector, China’s Ministry of Industry and Information Technology has authorized eleven private entities to offer wireless service on a resale basis as mobile virtual network operators (MVNOs).

 

Announced late last week, the decision enables the new licensees to provide competitive wireless services through network capacity leased from incumbent state-run carriers China Unicom and China Telecom. (Although private entities may also provide MVNO services through the network of China Mobile (CM), the nation’s top wireless carrier, sources indicate that CM has yet to submit license applications for its MVNO partners.) The MVNO licenses were granted as part of a two-year trial that, in the words of a ministry press statement, aims to “draw private investment and stimulate competition and innovation in the telecom sector . . . giving a wide range of consumers greater choice and better service.” License recipients include a unit of Alibaba Group Holding Ltd., China’s largest provider of e-commerce services and Jingdong Century Trading Co., a rival of Alibaba which operates thepopular JD.com e-commerce website.

 

Privately-held MVNOs are expected to capture a ten percent share of China’s $213 billion wireless market—the world’s largest—by 2018, and analysts predict that competitive pressure from MVNO market entry will reduce subscriber wireless bills by an average of three percent. Under government rules, the MVNOs must be controlled by domestic Chinese entities with total foreign ownership in such entities capped at ten percent. As a spokesman lauded the ministry’s action as “a milestone,” Zhao Guoquing, the vice chairman of JD.com, promised that his company’s entry into the national mobile market “will promote industry development, technological innovation and greater choice for Chinese consumers.”

 

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For further information, please contact:

 

Patrick S. Campbell, Partner, Paul Weiss

pcampbell@paulweiss.com

 

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