Chinese telcos will remain followers

Vodafone’s exit from China Mobile is financial rather than strategic – part of its plan to slake off non-core assets.
 
But the fact is its share in the biggest operator in the world’s biggest market has long ceased to have any strategic value.
 
The Wall Street Journal today reminds that when Sir Chris Gent first bought into the company a decade ago, he had hopes of raising Vodafone’s stake to 15% or 20%.
 
That seems as remote now as the idea that Chinese telcos desire foreign expertise or cash.
 
Duncan Clark, head of BDA Consulting and one of the most experienced observers of telecoms in China, told the Journal: “China's a Leninist state and it believes in control of strategic sectors” such as telecom, energy and aerospace.
 
The three carriers remain under state ownership and are controlled by the Communist Party through senior appointments.
 
After SK Telecom last year sold out of China Unicom, Spain’s Telefónica
remains the only foreign carrier with a China holding, leaving Chinese telcos largely isolated from the global industry.
 
China Mobile’s incoming CEO Li Yue has said the company will focus on its domestic business rather than seek expansion abroad along with other state enterprises.
 
That’s a reflection of national policy as well as an acceptance of reality – the company’s sole foray abroad has been in China-friendly Pakistan. Its attempt to buy a stake in Taiwan’s FarEasTone is embarrassingly stalled after 17 months.
 
China has not honored its WTO promise to allow in foreign telcos, meaning the state-owned carriers are not welcome anywhere except perhaps Africa.
 
This kind of separation from the rest of the world may suit party chiefs, but it also guarantees Chinese telcos will remain followers rather than leaders. They, and consumers, will pay the price.

MORE ARTICLES ON CHINA, CHINA MOBILE, CHINA UNICOM, SK TELECOM, TELEFONICA, VODAFONE

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