Alibaba poised to offer telecom services in China

The e-commerce giant's subsidiary has been awarded a MVNO license by the Chinese government

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Fri, December 27, 2013

IDG News Service (Bangalore Bureau) — Chinese e-commerce giant Alibaba Group is set to diversify into telecom services, having bagged a license from the Chinese government.

HiChina, a subsidiary of Alibaba, received a MVNO (mobile virtual network operator) license from China's Ministry of Industry and Information Technology, a spokeswoman from Alibaba said via email on Friday.

Alibaba is not providing further details at this point, she added.

The ministry said Thursday it had issued licenses to 11 private companies in a bid to get greater private sector involvement in the telecom sector and stimulate competition.

Under the MVNO program, the new operators will resell services from China's three state-owned operators -- China Mobile, China Telecom and China Unicom.

"Alibaba's move to offer MVNO services is consistent with the prevailing strategy among China's major Internet companies, namely to gain control of as many major user gateways to the mobile Internet as possible," said Mark Natkin, managing director of Marbridge Consulting in Beijing.

The government this month issued 4G licenses to operate LTE TDD (Long-Term Evolution Time Division Duplex) networks in the country to the three operators.

The market opportunity for Alibaba and the other new players could be large if they are able to get the right terms from the incumbent operators. China accounted for 1.2 billion out of a global total of 6.6 billion mobile subscriptions at the end of September, according to a report by Ericsson. The country added 30 million new subscriptions in the third quarter.

The government plan to involve private companies has the potential to improve efficiency and service to users and make the state-owned operators more competitive, but its success will depend on the cooperation of the operators, Natkin said. "If they drag their feet or throw up too many obstacles for the MVNOs,A the wholeA experiment may end up yielding a lot fewer positive results," he added.

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Alibaba has been promoting to handset makers in China its own Linux-based mobile operating system, which could get a boost from the group itself offering mobile services. The company could also use its MVNO service to promote some of its e-commerce services and applications.

By getting more users to download its mobile apps, Alibaba can strengthen its position in mobile shopping, mobile payment, and related services like shopping using location based services, Natkin said. A brick-and-mortar merchant might work with Alibaba to promote its products and services to nearby mobile users, and facilitate payments using Alibaba's Alipay wallet, he added.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

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