Suning eyes new telecom market

A Suning Appliance Co Ltd outlet in Shanghai. Yum! Brands Inc has opened trial KFC and Pizza Hut restaurants in Suning stores in 17 cities including Nanjing, Beijing, Shanghai and Dalian. [Photo / China Daily]

China is about to release the first group of licenses for mobile virtual network operators, with electronics conglomerate Suning Commerce Group Co Ltd saying it has signed deals with the country's two telecom carriers.

As new entrants to the once-exclusive telecom industry vie to boost their portfolios, gain public exposure and possibly cash in on the fledgling business, new capital will flow into the sector and improve the quality of service.

Thanks to its first-mover strategy, Suning, whose business spans electronics, retail malls and e-commerce, will move into telecommunications by partnering with China Unicom Ltd and China Telecom Corp Ltd, the company said on Monday.

"It is highly likely that Suning will be among the first batch of enterprises with at least national MVNO licenses, marking a milestone in introducing private capital into the industry," according to a company statement sent to China Daily.

Suning said it is well-placed to meet the application requirements, which include telecommunications-related experience, a long and consistent track record of profitability and a team of 50 people to oversee the business.

"We have been housing booths of (the three big) telecom operators in our 1,700 outlets across the country for about a decade.

"We are familiar with the workings of the telecom business," Sun Weimin, Suning's president, said in an earlier interview.

A directive from the Ministry of Industry and Information Technology in January allowed private Chinese companies to offer mobile communications services directly to end users.

A MVNO usually leases bandwidth at wholesale rates from telecoms providers to provide customers with tailor-made solutions. By purchasing bandwidth, the idea is that new entrants will stay focused on providing unique services that will differentiate them from the big three operators: China Mobile Ltd, China Unicom and China Telecom.

Media reports identified eight companies, including Suning and archrival Gome Electrical Appliances Holding Ltd, as well as e-commerce vendor Alibaba Group Holding Ltd and JD Mall, as finalists for the licenses.

Alibaba and JD acknowledged their applications when approached by China Daily on Monday, but both said they had no further information to reveal at this stage.

MVNOs are typically good at addressing specific market needs, said Anne Bouverot, director-general of the GSM Association, a global industry alliance of mobile operators and related companies.

"In Europe, certain MVNOs are targeting a minority of people who come to work in another country for a few years. For instance, some operators in Germany will combine specific content that Turkish people who reside in the country love to read," she said.

But it also means that they are not necessarily very big, Bouverot noted. "They can be successful only when they focus on a niche market."

To succeed, MVNOs need to possess an existing distribution system and a solid customer base for the cross-selling of products and loyalty programs. These have put companies such as Suning in an advantageous position, said Ng Kuo-pin, an executive partner at consultancy Accenture.