Summary:

China presents one of the single biggest opportunities for mobile companies looking for more growth, and it’s no surprise that companies lik…

Shanghai skyline, China
photo: Robert S. Donovan

China presents one of the single biggest opportunities for mobile companies looking for more growth, and it’s no surprise that companies like Apple are doubling down on their investments there. But similarly, Chinese mobile players are looking at ways of exporting their products and playing on their brands abroad, and it’s not just device makers like Huawei and ZTE leading the charge. The latest: state operator China Telecom, which today announced a new consumer mobile service in the UK, its first outside the mainland.

China Telecom will be starting a new mobile service as an MVNO in partnership with Everything Everywhere, the joint venture between France Telecom’s Orange and Deutsche Telekom’s T-Mobile in the UK. That means that while China Telecom will operate the service, including all customer and billing management, it will be doing so on network infrastucture owned by the two UK operators.

According to the FT, this will be only the beginning: China Telecom’s subsidiary China Telecom Europe is understood to also be looking to launch similar services in France and Germany; and is also looking for a similar MVNO launch in the U.S., where it already has a deal for business customers with AT&T (NYSE: T) — although in wireless the two work on different networks.

For Everything Everywhere, the deal is another signal of how the JV is looking to beef up its wholesale offerings at a time when the UK retail market remains competitive: In October Everything Everywhere reported that it had 27.5 million customers, a decline of 1.4 percent on the year before but still representing a growth in revenues and the more lucrative contract subscriber base. The operator now has 24 MVNOs on its network.

The China Telecom MVNO, due to launch sometime in Q1 2012, will very much play on China Telecom’s brand recognition among Chinese living and visiting the UK, who will be the first target customers for the service. China Telecom is China’s biggest fixed-line operator, with just under 170 million subscribers, as of November 2011. In mobile it reported 123.4 million subscribers, making it the third largest behind China Mobile and China Unicom, but still among the very biggest in the world.

With that in mind, the idea of targeting only Chinese residents and visitors in the UK and the rest of Europe makes this a small-scale venture — almost too small for a company the likes of China Telecom. There are only an estimated two million Chinese living in Europe, with 600,000 of them in the UK. My guess: given the much larger scale that China Telecom normally works at, it’s likely that if this MNVO takes off, we might see a broader offering and marketing effort for the service.

It will be worth seeing how China Telecom faces up to the MVNO challenge. There are plenty out there already that are thriving, but they do so on a very low cost base because the margins can be very slim. Those MVNOs that have tried to enter the market with a costly splash — remember Disney (NYSE: DIS) and Helio? — have not fared as well.

China’s mobile market has thrived around new services related to mobile content, particularly since many use their phones rather than PCs to access the web. It will be worth watching how and if this comes into play, too — or whether this will simply be about cheap calls back home.

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