|Innovating The Next Big Thing||May 25, 2013|
• Analyst Insights
• Enterprise Insights
• Network & Information Security
• Enterprise Mobility
• Remembering 9/11
Next Innovator Group
Feedjit Live Web Stats
• Ghost City
Ovum: China opens door to private investment
Jul 13, 2012 – Jane Wang
China’s Ministry of Industry and Information Technology (MIIT) recently issued a policy that will open the Chinese telecommunications industry to private investment. The sector is currently dominated by state-owned companies, but the government’s national economic strategy, which was released in May 2010, proposed using more private investment to stimulate the economy, increase competition, and improve outcomes for customers. Private investment in the telecoms industry will be essential if the Chinese government is to realize its ambitious convergence plan and its soon-to-be-released broadband plan.
The MIIT’s new policy only identifies the areas of the telecoms industry that will be opened to the private sector. Private investors will require more clarity about the rules for investment before they decide to risk their capital. More specific policies must be released by the MIIT and other government departments if they are to ensure the flow of private funds into the telecoms sector.
Eight areas opened up to private investment
In its new policy, titled “Measures to Encourage and Guide Further Investment of Private Capital in the Telecommunications Industry”, the MIIT has opened eight areas up to private investment:
While foreign ownership was not directly addressed in the policy, we expect that the MIIT will follow China’s existing foreign ownership rules by requiring foreign companies to set up joint ventures with local companies that are limited to 50% foreign ownership.
The MIIT’s policy has been released ahead of similar policies for other industries. In Ovum’s view, the MIIT’s aggressive approach is due to the capital requirements of China’s telecoms industry, which needs private investment to achieve the goals of the government’s convergence and broadband plans. Both plans will require considerable investment and innovation from the private sector if they are to deliver on their goals of nationwide broadband coverage and cable network upgrades over the next few years.
A good start, but more certainty is needed
In our recent report “Fixed Broadband Overview: China”, we recommended that the Chinese government should do more to encourage private investment in the telecoms industry. The MIIT’s announcement is a step in the right direction, but there are still a number of uncertainties that it will need to resolve if it is to attract the required levels of private capital. All of the eight investment areas will begin with trials before they are expanded across the country in the next few years. However, this will not yield the required results if private investors don’t have the certainty and clarity needed to ensure their investments.
The MIIT needs to release the timetables and geographic coverage of the trials, and clarify the entry criteria and procedures for entry. The telecoms regulatory framework will also need to be reformed. For example, the MIIT must address mobile wholesale access before private companies can enter the mobile resale business. Without a number of detailed policy changes, the private investment needed to support competition in the telecoms market will not materialize.
The MIIT requires cooperation from other agencies
Private sector companies that are looking to enter the Chinese telecoms industry will also encounter challenges that require action from other government agencies. As telecoms services are typically capital intensive, they require private enterprises to invest large amounts of capital. This requires favorable macroeconomic and microeconomic conditions.
The National Development and Reform Commission, which regulates prices in China, will need to collaborate with the MIIT to regulate interconnection prices for basic telecoms services in order to create a fairer competitive environment and support returns on private investment. The Ministry of Finance will also need to address relevant financing policies to support private enterprises, which is an increasingly difficult task in the current global financial environment.
While the MIIT has opened the door to for private investment, much more work is needed if the government is to attract sufficient levels of investment to support its ambitious plans. This announcement is just the first step.
» Send this article to a friend...
» Comments? Tell us what you think...
» More Analyst Insights articles...
Commentsblog comments powered by Disqus
Support This Site
• 5/24 Frontline Sentinel: What Java's installer should really say (Funny)
• 5/24 Frontline Sentinel: How to build C-level support for the benefits of penetration testing
• 5/23 Frontline Sentinel: "Interview with a Blackhat" by Whitehat Security
• 5/23 Gartner Says IT Spending in Indian Banking and Securities Market To Reach 422 Billion Rupees In 2013
• 5/23 Gartner Announces Rankings of Its 2013 Supply Chain Top 25
• 5/23 iSuppli: Global Touch-Screen Panel Shipments to Double by 2016, IHS Analyst Announces at SID
• 5/23 iSuppli: Falling Commodity Prices Give Buyers Using Cost Analysis the Upper Hand in Supplier Negotiations
• 5/23 Wireless Watch: New Intel chief puts post-smartphone devices at the heart of his agenda
• 5/23 Wireless Watch: Satellite spectrum under siege from cellular predators
• 5/23 Faultline: TiVo blows away numbers – still ignored by investors
• 5/23 Faultline: Yahoo gambles on social networking to make up for lost time
• 5/23 Canalys: Top iOS and Android apps largely absent on Windows Phone and BlackBerry 10 - App quality not quantity now needs to be the priority for Microsoft and BlackBerry
• 5/22 2013 Security Market Outlook - Gartner Security & Risk Management Summit Preview
• 5/22 iSuppli: China’s Labor Day LCD TV Sales Surge by Double-Digit Percentage
• 5/21 Gartner Says IT Operations and Management Software Market Grew 4.8 Percent in 2012
• 5/21 iSuppli: One Quarter of All Notebooks to Ship with Touchscreens by 2016; Intel Endorses Touch Technology at SID
• 5/21 iSuppli: Can UHD Televisions Avoid the Fate of 3D Sets?
• 5/21 iSuppli: After a Year of Decline, Global Flat-Panel TV Market Ekes Out Marginal Growth in the First Quarter
• 5/21 Frontline Sentinel: Network perimeter security: How to audit remote access services
• 5/20 Gartner Says Business Intelligence/Analytics Is Top Area for CFO Technology Investment Through 2014
• 5/20 Gartner Says Worldwide Supply Chain Management Software Market Grew 7.1 Percent to Reach $8.3 Billion in 2012
• 5/20 Yahoo Acquisition of Tumblr Can Lead to Content Platforms
• 5/20 iSuppli: Top IHS Experts to Attend SID Display Week 2013
• 5/20 iSuppli: How Intel Can Enable a Successful $200 PC in the Age of the Media Tablet
• 5/16 iSuppli: Shipments of Sports and Fitness Monitors to Total One-Quarter Billion from 2013 Through 2017
• 5/16 Canalys: World-class speaker line-up announced for Canalys Channels Forums 2013 - Confirmed sponsors include Lenovo, HP, Cisco and EMC at keynote level
• 5/15 Gartner Says PC Market in Western Europe Declined 20.5 Percent in First Quarter of 2013
• 5/15 Gartner Highlights 2013 Cool Vendors That Are Transforming How Businesses Operate
• 5/15 iSuppli: Google Unlikely to Deploy its Fiber Broadband Service Nationwide
• 5/14 Asia Pacific CEOs View Themselves as Tech-Savvy Pioneers, According to Gartner CEO and Senior Business Executive Survey
• 5/14 Gartner Says Asia/Pacific Led Worldwide Mobile Phone Sales to Growth in First Quarter of 2013
• 5/14 Gartner Identifies Five Actions for Enterprise Architects to Harness the Disruption of Consumerization
• 5/14 iSuppli: Small Cells with Wi-Fi Set to Reshape Wireless Communications Market
• 5/13 Frontline Sentinel: How Facebook Updates Would Look in Real Life [Funny]
• 5/13 Gartner Says Project and Portfolio Management Software Market Grew 11 Percent in 2012
• 5/13 Gartner Says India IT Infrastructure Spending Will Reach $2.3 Billion By 2014
• 5/13 What to Expect at Google I/O
• 5/13 iSuppli: EU Antidumping Duties to Price Chinese Modules out of the European Market
• 5/13 iSuppli: Combo MEMS Inertial Sensors Motor Their Way to Brisk Growth in the Automotive Market
• 5/12 Frontline Sentinel: Two-Factor Authentication for Social Media Sites
• 5/10 McAfee Blogs: RealTime for ePO – Optimized Endpoint Security
• 5/10 iSuppli: Intel VP to Discuss Low-Cost Computing Initiative at IHS/SID 2013 Business Conference Keynote
• 5/10 Ovum: Ovum comments: GB smart meter delay better late than never
• 5/10 Gartner Says India Has The Potential To Lead The World In The Nexus Of Social, Mobile, Cloud And Information But May Waste The Opportunity
• 5/9 Frontline Sentinel: NSA's Manual on Hacking the Internet
• 5/9 iSuppli: Dimming PC Prospects Spur Inventory Reduction in Computer Supply Chain
• 5/9 iSuppli: At SID 2013: The Human Visual Interface as Key to Innovation in High-Performance Displays
• 5/9 Frontline Sentinel: 8 charged in $45 million cybertheft bank heist
• 5/9 Gartner Highlights Three Key Foundational Elements for Demand-Driven Retail Success
• 5/9 iSuppli: Korean and American Versions of Galaxy S4 as Different as Kimchee and Coleslaw, IHS Teardown Reveals