China Telecom to launch U.S. MVNO in 2012

China Telecom will start selling wireless service in the United States under its own brand as an MVNO next year, a senior executive at the telecom giant said. However, the company's ambitions could be thwarted by government opposition to Chinese encroachment in the U.S. wireless market.

Donald Tan, president of China Telecom Americas, told Bloomberg in an interview that the company will offer handsets that can work both in the U.S. and in China, and that the cost will be "competitive." The company plans to target Chinese-Americans, and students and tourists who travel often between the two countries. Tan said that China Telecom, which uses the CDMA 2000 standard, is already in market trials with several potential wholesale partners, which he declined to name.

Interestingly, Tan said that if the U.S. service does well, China Telecom might consider building or buying its own network here. "If the service is growing fast, maybe we can set up our own infrastructure," he said. "The money is no big problem for us."

Indeed, China Telecom listed $9.6 billion in assets, including $4 billion in cash, at the end of June. The company has a total of 191 million wireline and wireless subscribers.

In a research note, Credit Suisse analyst Jonathan Chaplin noted that there is a long list of failed U.S. MVNOs, but that some good might come from China Telecom's entrance into the market, and could benefit Sprint Nextel (NYSE:S) or Verizon Wireless (NYSE:VZ), both of which are CDMA carriers. Disney, ESPN and others attempted MVNO offerings in recent years but exited the market due to anemic customer interest.

"We think an acquisition of a carrier with a significant spectrum position would be challenging to get approved--a wholesale relationship is more likely," Chaplin wrote. "We also believe China Telecom would most likely seek a partnership with a national carrier.  Of the national carriers, Sprint and LightSquared have been the most open to wholesale deals with new entrants (although AT&T (NYSE:T) and Verizon have substantial wholesale businesses as well)."

The main hurdle to China Telecom's entrance might be opposition from the U.S. federal government, which has been cool to Chinese entrants into the U.S. network infrastructure market, most notably Huawei and ZTE. Last month the U.S. Commerce Department decided to block Huawei from participating in the construction of a nationwide, interoperable public-safety LTE network. The government said the decision was based on national security and declined to elaborate. Huawei has since been pushing back strongly against the decision.

If it does launch an MVNO in the United States, China Telecom wouldn't be the first such offering from an Asian carrier. Japanese giant DoCoMo launched an MVNO service in April in the United States. The DoCoMo USA service is primarily targeted at Japanese who travel between Japan and the United States.

For more:
- see this Bloomberg article

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