China Telecom may enter U.S. wireless market as MVNO

Reuters

China Telecom Corp Ltd (Beijing, P.R.C.), the smallest of the country's three carriers, is considering entering the U.S. wireless market by offering services to handset consumers who frequent both countries, a company executive said on Wednesday.

China Telecom plans to work out a scheme using MVNO (mobile virtual network operator), aiming to use the network infrastructure of a U.S. operator to provide such services, the executive said.

He said he did not expect significant regulatory hurdles for the MVNO plan, although some analysts are skeptical.

"We're trying to see if we can work with U.S. telecom operators so that we can come up with SIM cards that carry two numbers -- one U.S. and one China," the executive, who declined to be identified because he was not authorized to speak to the media, told Reuters.

Since each SIM card would carry two numbers, consumers, such as Chinese residents and students in the United States, would be charged two monthly fees, which will be more cost-effective than roaming charges, he said, declining to say which U.S. operators the company was talking to.

"China Telecom's entry would be positive for the carrier(s) that they partner with or acquire. We think the most likely beneficiary is either Sprint or Verizon , though it is too early to know for sure," Credit Suisse said in a report. "Any new entrant is worrying for the industry as a whole, particularly a well-funded new entrant with a low cost of capital. However, the list of failed MVNOs is extremely long and few MVNOs have had any lasting impact on the industry."

China Telecom now provides fixed line services to corporate customers in the United States, but sees the wireless mobile sector as one that is potentially lucrative for it since many Chinese travel between the two countries.

A Bloomberg report quoted Donald Tan, president of China Telecom Americas, as saying in an interview that the carrier will consider buying or setting up its own wireless infrastructure if demand for the mobile service was strong.

However, some analysts and the executive in Asia said it was unlikely that the U.S. government would give the green light to such infrastructure plans due to national security concerns.

China's top network equipment makers, Huawei Technologies (Shenzhen, P.R.C.) and ZTE Corp (Shenzhen, P.R.C.), have had problems trying to crack into the U.S. market despite success elsewhere in the world, including Asia and Europe.

Earlier this year, Huawei said it would back away from its acquisition of U.S. server technology company 3Leaf's assets, bowing to pressure from a U.S. government panel that had suggested it should divest the assets amid concerns from critics that it might retain links with China's security services.

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