Doing telecom business in China

Posted on February 16, 2011  /  7 Comments

Talk about coincidence.

Just yesterday, on the train to Brussels, I just finished answering a series of questions sent by Voice & Data, the leading ICT industry publication in South Asia. This included a question on whether it would be possible for Indian telcos to do business in China. My answer was “China is a market that is still heavily controlled by the government. I see possibilities for Indian equipment/software/apps suppliers to enter, but believe it is premature to think of Indian operators entering the Chinese market like they have entered African or South Asian markets.” I went on to say that I was not an expert on corporate strategy, either of Chinese operators or of Indian operators. Unlikely that this response will appear in the final piece.

And today, I am at the conference on Asian rise in ICT R&D in Brussels, and up comes a senior executive of Telefonica. His entire talk is about the strategic alliance between his company, one of the largest telecom operators in the world with a massive footprint in Latin America and Europe, and China Unicom, one of the major operators in China. Telefonica is the second largest shareholder of China Unicom (after the government of China) and its Chairman sits on the China Unicom board. CU has invested in Telefonica and its Chairman sits on Telefonica’s board. They are doing common procurement of dongles, for example; they are educating each other’s managerial staff; collaborating on LTE development, and so on. Wow.

Then an irreverent soul from the audience asked when Telefonica would be able to sell directly in China. It turned out that the Telefonica executive was expert only on regulatory strategy and was not best placed to answer that kind of sensitive question. But you can infer the answer.

So there’s the answer: it is possible to work with the state-market enterprises of China, but it is not in the conventional way. It is through the classic JV route that one uses in opaque, patronage-ridden countries. It is not the competition path; it’s the collaboration path.

I dislike travelling 10+ hours to participate in two-day conferences. But on days like this, I see it makes sense.


  1. Every country has a Basil Rajapaksa. Airtel, to start operations in Sri Lanka, heavily bribed Rajapaksa bros. It is this what you call collaboration path, you do not have to do to Brussels to learn it.

  2. Even though China Unicom is the 2nd largest, their market share is very small, I’m “guessing” around ~10%, correct me if wrong. What about iPhone, after they lost the negotiations with China Mobile, they partnered with China Unicom but both entities cater to exclusive consumer. China mobile was not willing to share their profits with iPhone.

    On several occasions I had met Indian software developers at the airport in Kunming, coming to China to develop software for China Mobile; especially with the 3G expansions. Perhaps India should capitalize on the software aspect in the telco industry?