China issues trial wireless licences to private operators

Chinese regulators have taken a major step forward in opening up the world's largest wireless market by issuing trial wireless licences to several private operators including a unit of e-commerce giant Alibaba Group.

The move is part of the government's plan to bring in more private players in state-controlled industries such as telecommunications and banking.

A statement, issued yesterday by the ministry of industry and information technology, said that it has approved the first batch of eleven private companies on trial basis in the mobile communications business.

The initiative is aimed at bringng more competition in the $213-billion wireless market. The new licences will be issued for a trial period of two years.

Entry of private capital will ''stimulate competition and innovation'' and ''provide consumers with more choices and better service,'' the statement said.

Up until now, the world's largest wireless market is controlled by three state-owned telecom giants: China Mobile Ltd, China Unicom (Hong Kong) Ltd, and China Telecom Corp. Under the new policy, the licence holders will be able to operate mobile business based on services leased from the ''big three'' wireless carriers.

According to analysts, the new operators may look for a niche segment to differentiate their offerings from the major operators and are expected to offer new products and services at cheaper prices.

Licence winners include Hi China Web Solutions (Beijing) Ltd, a subsidiary of privately-held Alibaba Group Holding Ltd, and its rival Beijing Jingdong Century Trading Co which runs the popular JD.com service.

Under the proposed reforms unveiled in the Chinese communist party's third plenum last month, the leaders have suggested a greater role of private capital in a number of state-dominated industries, including banking, telecom and transportation, though details have not been disclosed.

JD.com said that it plans to offer mobile services in the second quarter and is ambitious of becoming the country's fourth-largest operator within five years.

The other nine approved companies include DiXin Tong Inc, Bashi Zaixian Ltd, Zhejiang Lianlian Technology Co, Telling Telecom Holding Co Ltd, Funtalk China Holdings Ltd, Beijing Huaxiang Lianxin Technology Ltd, Beijing Bewinner Communications Co Ltd, Soshare Network Technology Co and Telephone World Digital Group.

China Telecom believes that virtual mobile network operators would bring opportunity as well as challenge to the company.

Two-thirds of China's 1.2- billion mobile users have yet to upgrade to 3G services, and wireless operators are improving customer service to encourage users to make the change.

China Mobile, the country's leading telecommunications company, has over 760 million customers, followed by China Unicom with 280 million and China Telecom with 185 million subscribers.

Initial licensees would lease services from China Telecom and China Unicom, while subsequent entrants would work with China Mobile, the regulator said.

According to some estimates, new private entrants into the country's wireless market will gain a market share of about 10 per cent in the next five years.