Telecoms Infrastructure Prepares to Open 中国电信基建市场或更开放

By newsdoug on March 12, 2012

I’ll wrap up this sunny Monday morning in Shanghai with a look at a subject that’s a bit techie but of big interest to me and global telcos, namely the subject of China’s largely closed telecoms infrastructure market where change could be coming soon. Longtime industry watchers will recall that foreign telcos running the range from AT&T (NYSE: T) in the US to Europe’s Vodafone (London: VOD) held out big hopes for the China market after the country officially joined the World Trade Organization (WTO) in 2001. Despite making vague commitments to open the market, China made it extremely difficult and unprofitable for the few foreign ventures it allowed in the space, meaning that today the Chinese telecoms service industry is still dominated by domestic companies, most notably the country’s 3 major telcos, China Mobile (HKEx: 941; NYSE: CHL), China Unicom (HKEx: 762; NYSE: CHU) and China Telecom (HKEx: 728; NYSE: CHA). Now Chinese media are reporting that the nation’s top telecoms regulator, the head of the Ministry of Industry and Information Technology (MIIT), said late last week in Beijing that the government has officially made boosting private investment in telecoms infrastructure part of its new policy, and the regulator is now drafting specific details to implement that plan. (English article) It’s obviously still too early to say if this new policy will change anything, but clearly there could be a huge new opportunity for foreign telcos to build or operate networks and related infrastructure like data centers. AT&T was one of the first to enter the market even before China entered the, but its operation — which is now part of French-American company Alcatel Lucent (Paris: ALUA) — was always limited to the Shanghai market and thus was never able to compete very effectively, especially for Chinese customers. Vodafone also held out big hopes for the market about a decade ago when it made a multibillion dollar investment in China Mobile when the country’s top mobile carrier made its landmark public listing in Hong Kong. But again, that investment never helped Vodafone make any inroads into China, with the result that Vodafone finally ended up selling its China Mobile stake in 2010. Many western companies have given up on China in the current climate, but clearly there’s big opportunity for profits from a market that is both the world’s largest by mobile subscribers and Internet users. If this new plan moves forward, which looks likely based on the minister’s comments, look for some new investment guidelines perhaps as soon as the end of the year. If that happens, look for a flurry of new telecoms projects from the likes of globla players like AT&T and Vodafone, as well as regional players like Korea’s SKTelecom (Seoul: 107670), Singapore’s Singtel (Singapore: ST) and Taiwan’s Chunghwa Telecom (Taipei: 2412) starting in 2013.

Bottom line: A proposed opening of China’s telecoms infrastructure market could result in a flurry of deals by regional and global telcos in China as soon as next year.

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