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)