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Private firms apply for telecom licenses

(Global Times)

10:06, May 22, 2013

Over 60 private enterprises have submitted applications to the government regulator for business licenses for telecom value-added services, which previously were mainly controlled by the nation's three State-owned telecom carriers, a media report said Tuesday.

Most of the enterprises are Internet companies, who hope to get the licenses for management of Internet data centers and Internet service providers that will be issued by the Ministry of Industry and Information Technology (MIIT) this June, a source close to the matter was quoted by the Economic Information newspaper as saying.

In addition, six private companies will also get mobile virtual network operator licenses, which will allow them to purchase mobile telecom services from the three State-owned telecom carriers and resell the services to consumers under their own brands.

"Telecom charges will be lower in the future after more private enterprises enter into this sector," the source said.

Although private enterprises have shown a lot of enthusiasm for the business opportunity, analysts said they are unlikely to make big profits in the short term, due to the high operation costs.

"They still have to buy or lease the basic mobile telecom services from the three major operators and then sell the services to customers, since they don't have their own mobile telecom infrastructure," Shen Zheyi, a research director at research firm Gartner, told the Global Times Tuesday.

Wang Jun, an analyst at research firm Analysys International, told the Global Times Tuesday that the applicants' main interest is "to grab access to Internet and telecom services, rather than profit margin in the initial period."

According to a guideline released by the MIIT last June, private enterprises only need to set up customer service systems and other supporting networks to enter the sector.

In the guideline, the MIIT encouraged private capital to invest in eight key areas in the telecommunications sector, which is still dominated by State-owned enterprises, in a bid to boost competition in the market and allow customers to enjoy more diversified, convenient and cheaper services.

The ministry guideline listed business areas that would become available to private companies, and that were previously controlled mainly by State-owned enterprises, such as the resale of mobile communications business and broadband access networks, as well as value-added services.

"China's telecom industry will enter a new era and become more mature if the licensing policies are strictly executed," Wang said.

Currently, some large-sized enterprises like Huawei and Alibaba have already passed reviews by the MIIT to obtain licenses for management of Internet data centers and Internet service providers, the Economic Information newspaper reported.

There have also been rumors in the media since the end of last year that Shenzhen-based Internet company Tencent might gain a mobile virtual network operator license, which would allow it to join the first batch of Internet firms entering the telecom sector.

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