China Telecom to start UK service

China Telecom plans to launch a mobile service in the United Kingdom within three months, resulting in the first-ever Chinese SIM card outside China, the company said on Wednesday.

The SIM card, called CTEXCEL, will mainly be marketed to Chinese residents, businesses and visitors in the UK, said Ou Yan, managing director of China Telecom Europe.

The service will use rented space on the network of Everything Everywhere, the joint venture of France Telecom SA and Deutsche Telekom AG, Everything Everywhere and China Telecom said.

CTEXCEL will enable callers to directly make cheap calls to China. Service, rather than low prices, will be the advantage, Ou said.

"We will provide bilingual customer service to our users, which is a necessity for some Chinese people in the UK," he said, adding that China Telecom's connection quality will also provide another edge.

"They will enjoy the same signal provided by the same carrier (rather than by overseas partners)," Ou said. He added that the calling costs, which have not been confirmed yet, will be much cheaper compared with using UK SIM cards.

Despite being one of the smallest of the three Chinese carriers, China Telecom is also considering entering the US market with a similar mobile virtual network operator (MVNO) model, so-called because it uses another operator's network.

The company currently offers corporate telecom services to businesses around the world as well as to consumers and companies in China.

A total of 271,000 Chinese were living in Britain in 2010, according to the Office for National Statistics, about 0.4 percent of the country's population.

The UK also attracted 110,000 Chinese tourists in 2010, an increase of 23 percent from the year before, according to the Daily Mail newspaper.

"Everything Everywhere offers MVNO customers the biggest 3G network and widest 3G coverage in the UK, making us the partner of choice for MVNOs. We look forward to growing our partnership with China Telecom (Europe) in the future," said Marc Overton, vice-president of Everything Everywhere's Wholesale and M2M unit.

Steven Hartley, telecom strategy practice leader at the industry research firm Ovum, said that the move was interesting for China Telecom, but its effect on the market would likely be small.

"The deal is notable for China Telecom's expansion outside of China and as an attempt for it to do something different from its rivals. However, the impact in the UK is likely to be muted," he said.

"The company's main selling point is likely to be cheap calls home. However, the likes of Lycamobile and Lebara already offer this. These rivals are also able to sell to a broader audience wanting to call other countries aside from China."

Ou disagreed, saying that there is little room for a price war. It will cost only 0.1 yuan, or less than 2 US cents, a minute to call China using Lycamobile.

"Even if other carriers try to reduce call charges (after CTEXCEL hits the UK market), they can't provide the service we have," he said.

As the first service tailored for Chinese expats in the UK, China Telecom will not have any "clear competitor" in the short run, he said. In addition, the service may also be expanded to Germany and France if it proves successful, he said.