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Is China Mobile Ready for Overseas Push?
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The announcement by China Mobile Communication Corp (CMCC) yesterday to acquire Pakistan mobile phone firm Paktel Ltd is no doubt a landmark in the Chinese operator's increasingly aggressive overseas push.


The US$284 million deal by CMCC, parent of Hong Kong-listed China Mobile Ltd, should be applauded as it is in line with the government's drive to encourage State-owned conglomerates to expand overseas.


But for a company raking in nearly 300 million yuan in pre-tax profits on about 800 million revenue a day, the US$284 million deal represents only a drop in the ocean.


That could be good news to observers who have been calling for operators to take a prudent and gradual approach in overseas expansion, which could be risky for many Chinese companies.


But doubts have been raised about how willing CMCC is to make overseas purchase.


Ironically, CMCC, the strongest of China's top four telephone operators, has been the least willing to expand overseas. In contrast, China Netcom, the smallest of the top four, has been the most aggressive.


That is largely because CMCC has been sitting on its well-entrenched monopoly, lacking a stimulus to look at overseas markets.


CMCC had 318 million mobile phone subscribers by the end of last year, up 20 percent year-on-year.


China's mobile market has long been described as a "duopoly" as there are only two cellular operators. In fact, the duopoly is actually dead as CMCC controls nearly 70 percent of the country's mobile phone subscription base and the smaller China Unicom has never posed a significant threat.


That could be further illustrated by government statistics showing CMCC controlled 70 to 80 percent of newly generated revenue and profits in China's entire telecom market last year.


So, it is easy to explain why CMCC, the world's largest mobile operator by subscribers, has long been focused on its home turf while Britain-based Vodafone Group PLC, the world's top cellular operator by revenue, has been aggressive in expanding overseas.


If the Chinese government truly wants CMCC to be aggressive in overseas markets, it should help foster real competition, which could force operators to look at overseas markets for new opportunities.


There has been much discussion about the government need to consolidate China Telecom, China Netcom and China Unicom into two companies and issue new licenses for mobile phone services. That could create new firms matching the size and competitiveness of CMCC. But the government has been swaying back and forth on the decision.


Unless there is a company strong enough to pose a serious challenge, there is no reason for CMCC to become truly aggressive in overseas expansion.


After you finish reading this story - supposedly in three minutes - CMCC might have generated nearly 2 million yuan with a 37 percent profit margin on its home turf. How can we believe such a firm is zealous enough to take risks to aggressively expand overseas?


(China Daily January 23, 2007)


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