Focusing on value-added telecom services
By Wang Guoping (China Daily)Updated: 2006-12-04 09:32
Value-added service
Value-added service is one area that China has
committed to opening up most in telecom service areas. At present, foreign
investors can form joint ventures without regional restrictions, as long as they
hold no more than a 50 per cent stake. It is also because value-added service
has a low entry barrier and big room for development in China.
However,
foreign investors are not very active in this business and most of them adopt a
wait-and-see attitude. The reasons are: they can't get an absolute majority in a
joint venture of value-added services; and the market consolidation is almost
completed.
One additional factor is that there are about 10,000 telecom
value-added service providers, but they have to rely on the six national basic
telecom service operators. So foreign investors do not want to accept a
situation that it is working with small and medium firms but without an absolute
say, but if they want to work with the six operators, they must have the
financial and technological strengths to attract the Chinese companies and also
consider their needs.
The best choice for foreign investors is to work
with the operators and a secondary consideration is influential large
State-owned enterprises.
By September, a total of 29 foreign companies
applied to establish joint ventures in value-added services. With continued
opening, foreign businesses can also enter the market through
acquisitions.
Among those applications, UNISK (Beijing) Information
Technology Co Ltd is the most noteworthy, the first value-added service joint
venture between a Chinese basic service operator and a foreign
investor.
The value-added telecom service has been growing very fast, but
its share in the whole telecom industry is still quite small and far from a
backbone of the industry. At the same time, the variety, content, quality, and
billing systems are also quite limited, so this business is still at a primitive
stage of its development.
Besides establishing joint ventures, foreign
businesses can also invest in Chinese telecom value-added service providers,
when they make overseas initial public offerings (IPOs), such as the Hong
Kong-listed instant messaging provider Tencent and the NASDAQ-listed online game
operator The9 Ltd.
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