Chinese MVNOs to face early difficulties

2 Apr 2014

High wholesale prices are likely to prevent mobile virtual network operators (MVNOs) from competing effectively with the three network operators, Sina Tech News writes. With wholesale prices levied on MVNOs reportedly higher than standard fees charged to distributors and agents, virtual providers are expected to rely heavily on branding and serving niche markets with value added services (VAS) to remain relevant, but are unlikely to pose a threat to entrenched network operators China Mobile, China Unicom and China Telecom. Whilst wholesale prices are subject to ongoing negotiations between network operators the Ministry of Industry and Information Technology (MIIT) and MVNOs, the current level of costing leaves virtual providers with little-to-no room for profits: according to local analyst Xiang Ligang of ‘The current price is painful for virtual operators, [and] together with the construction of service and billing systems, virtual operators [have] basically no profit space.’ Compounding the issue, the introduction of MVNOs into the Chinese market is still in its pilot stage, with the MIIT testing the waters for potential methods of increasing competition in the segment, and as such a significant reduction in wholesale pricing is, in the short term at least, unlikely to be forthcoming. In terms of operational strategies a number of MVNOs are expected to use wireless services as a promotional tool to drive up earnings in their core businesses, whilst others, such as e-commerce and social media providers are expected to more closely integrate mobile and VAS offerings into their existing operations to compete with the trio of incumbents.