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A Look At Some Of The Recent Reforms In The Chinese Telecom Space

The Chinese government recently announced that it would take further steps to reform the country's telecommunications sector. According to a notice issued by the CPC Central Committee and the State Council (China's Cabinet), the government will be pushing for greater private investment into the sector, while calling for more tariff cuts and committing to boost competition. Below we take a brief look at some of the recent reforms in China's telecom market and how they could impact the country's largest wireless carriers.

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Lower Tariffs To Improve Internet Penetration

China's government has been looking to improve Internet connectivity and reduce pricing for consumers, particularly in rural areas, as it works to gradually transform the economy away from manufacturing towards services. The government asked operators to reduce pricing for Internet services, while improving speeds back in 2015 and the new notice also urges carriers to cut telecom tariffs further. The big three carriers also introduced an unused data carry-forward policy beginning from October 2016, upon the request of Chinese Department of Telecommunication Development, effectively reducing monthly ARPUs.

Greater Private Sector Participation In Telecom

The government has also been talking about increasing private investment into the sector, with the recent notice indicating that it would give a "free rein to telecommunications companies in the development of the internet". While all three major carriers are already publicly listed, there has been talk of mixed-ownership reform for telecom players, allowing greater private investment, while reducing state ownership and increasing management autonomy. There has been speculation that China Unicom, the second largest carrier, could be chosen as a pilot firm for the reform, with Chinese Internet giants Alibaba, Tencent and Baidu potentially picking up stakes in the carrier.

Greater Competition And Market Reform

China has been looking to increase competition in the telecom industry, while allowing full convergence of telecom, broadcasting and Internet services providers. Last year, the government granted a telecommunications license to the China Broadcasting Network, creating a fourth telecom player. That said, the CBN's entry is unlikely to shake up the market in the near term, as the company currently lacks the capital to compete on scale with the big three players. There are some other signs that China could be moving towards a market-based model for telecom services. The country recently revised its spectrum policy, potentially allowing the country's 5G airwaves to be sold via a market-based approach such as auctions, instead of the typical administrative approval that was used historically.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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