Cable Consolidation Gets Subsidy Lift 中国政府为有线电视网络升级提供补贴
Beijing, determined to consolidate the nation’s fragmented cable TV industry by creating a single national operator, is promoting its plan with a new round of subsidies, a move that could ultimately not only benefit not only the new operator but also leading wireless telco China Mobile (HKEx: 941; NYSE: CHL). The fact that China Mobile could benefit from this new subsidy plan seems somewhat ironic, since China Mobile is already one of China’s richest state-run companies, and thus it has little or no need for this kind of cash subsidies from Beijing.
But I’m getting a bit ahead of myself, so it’s probably best to step back and explain why this new subsidy plan looks both smart but also a bit silly at the same time. According to media reports, Beijing will offering subsidies to local cable TV operators to help them upgrade their networks so that they can offer broadband service. (English article) These subsidies come as Beijing is also pushing its bigger plan to consolidate the nation’s many cable TV networks into a single national operator that would have wired-line networks into homes and offices throughout the country.
Such a network would provide a viable broadband competitor to China Telecom (HKEx: 728; NYSE: CHA) and China Unicom (HKEx: 762; NYSE: CHU), the nation’s 2 main wired-line broadband service providers that are currently being investigated by the powerful National Reform and Development Commission (NDRC) for monopolistic behavior.
So where does China Mobile fit into this picture? As the country’s only major telco without a fixed-line broadband network, China Mobile would desperately like to enter this arena as a potential new growth area, and is actively lobbying the telecoms regulator to change current rules that ban it from offering such service. (previous post) At the same time, China Mobile knows that Beijing is consolidating the nation’s cable TV operators into a single company, and realizes a tie-up with the new company would give it instant access to a national wired-line network, which would save it huge investments in both time and money to build a new national broadband network.
Accordingly, China Mobile has reportedly been talking about a tie-up with the company being set up to consolidate the cable TV industry, although no formal deal has been announced yet. I personally think Beijing should allow such a tie-up to go forward, which would allow China Mobile to use its huge cash pile to help the new national cable operator upgrade its network to offer broadband service.
Instead, this offering of government subsidies for broadband upgrades seems to indicate that Beijing still hasn’t decided whether to let China Mobile enter the broadband arena; or possibly that it wants the upgrades to start immediately rather than waiting for a tie-up to be formalized between China Mobile and the new national cable operator. If China Mobile does indeed ultimately partner with the new cable TV company, the biggest winner will probably be China Mobile itself, which would gain instant access to the new state-of-the-art wired-line broadband network financed largely by state money from Beijing.
Bottom line: A plan for Beijing to subsidize the upgrade of China’s cable TV networks for broadband service could ultimately benefit China Mobile if it forms a new tie-up with a new national cable operator.
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