Jurisdiction - China
Telecommunications, Media & Technology
Herbert Smith Freehills

13 January, 2013

 

 

The Ministry of Industry and Information Technology (MIIT) issued a consultation paper on the provision of mobile communications resale business on a trial basis (移动通信转售业务试点方案) on 8 January 2013. This marks the end of the monopoly on the provision of mobile services by state-owned telcos in China.

 

Background

 

The Chinese telecommunications industry has long been dominated by state-owned operators.  However, the Chinese Government has shown clear intention in recent years to promote private sector involvement. Most notably, the MIIT issued an unambiguous opinion on 27 June 2012 to encourage private investments in the telecommunications sector, which was discussed in a previous article.

 

Against this backdrop, the consultation paper issued by the MIIT signifies its first step to lay out implementation details on the liberalisation of the sector. The proposed implementation measures seek to allow domestic private investors and operators to provide mobile telecommunications services in China for the very first time. 

 

Which mobile communications business?

 

The specific mobile communications business which could be carried out by non-state-owned operators, as set out in the consultation paper, is “mobile communications resale business”. This is defined to mean the business of acquiring mobile communications services from basic mobile telecoms operators (i.e. operators who own mobile networks and related facilities) and repackaging and rebranding such services for sale to end-users.

 

Resale of mobile satellite communications services has been specifically carved out from the definition.

 

The proposed resale business is to be treated as a Type II basic telecom business (BTB) but regulated as a value-added telecommunications business (VATB) under the current Chinese regulatory regime.

 

Key features of the proposed implementation measures

 

1.     Only domestic private enterprises will be allowed to apply for the operation of mobile communications resale business within the first year of the two-year trial period.

2.     The domestic private enterprises are expected to fulfil various eligibility requirements:

a. the requisite minimum registered capital requirements (for nationwide business, RMB 10 million and for intra-provincial business, 1 million);

b. requirements on the qualifications of their key technical personnel;

c. requirements to put in place their own customer service systems and if so required by their business, accounting and business management systems;

d. the capability to provide long-term customer services and to protect network and information security; and 

e. entering into resale contracts with BTB operators: the contracts are expected to cover the allocation of numbering resources, the respective responsibilities on maintaining service levels, consumer protection and the protection of data security of customers.

3.     Importantly, the consultation paper also proposes a number of restrictions and requirements pertaining to BTB operators who own mobile networks, including that they must cooperate with at least two domestic private operators for the purposes of mobile resale business during the trial period and that the network access services provided to mobile resale business operators are at least of the same quality as that provided under their existing network.  There are also restrictions on them imposing terms relating to exclusivity.

 

Observations

 

1.     Whilst the proposed arrangements as set out in the consultation paper is certainly good news for domestic private operators interested in tapping into the provision of mobile services, the proposed implementation measures do not seem to extend to foreign investors and operators that wish to operate as a MVNO under this new regime. It therefore remains to be seen whether any further relaxation of the regulations will favour foreign investors.

2.     When the Telecommunications Business Classification Catalogue was last revised in 2003, the business of “resale of basic telecommunications services” was deleted from the catalogue.  The Minister of the MIIT indicated in December last year that a revised Classification Catalogue will be released in 2013.  It is expected that new telecom businesses will be included in the revised catalogue, including the provision of MVNO services.

 

 

 

 

For further information, please contact:

 

Michelle Chan, Partner, Herbert Smith Freehills
michelle.chan@hsf.com
 
Karen Ip, Partner, Herbert Smith Freehills
karen.ip@hsf.com

 
Clarice Yue, Herbert Smith Freehills
clarice.yue@herbertsmith.com
 

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