Foreign operators entering China enterprise market should invest in VAS

MELBOURNE, AUSTRALIA: Global operators have an easy way to move into China’s enterprise market, but market restrictions and regulatory uncertainty remain barriers.

While the market for basic telecoms services is already dominated by local operators, Ovum advises to offer value-added services based on international offerings that can be provided with relatively lower capital investment.

Leveraging established relations with MNCs from their home market is the most effective way for foreign operators to enter the telecoms market in China.

The increasing number of Chinese enterprises going abroad to explore international business is the next natural target market for operators entering China. However, Chinese enterprises generally demand a higher amount of customization than their counterparts in other countries, which increases complexity for foreign operators.

Developing services for enterprise customers in China is easier than in the consumer telecoms market, which requires much larger scale and investment. Once established in the market, they can also look at Chinese enterprises that already have overseas business or have plans to expand internationally. BT and AT&T are doing business in this way.

Partnership are the key to sustained success. According to China’s WTO agreement, foreign operators have to establish joint ventures (JVs) with Chinese companies to provide basic telecoms as well as value-added business services (VAS) in China.

In the VAS space, there are still a lot of opportunities for partnering with domestic telcos. The three major operators currently operate 3G networks and are looking for new mobile services to attract new customers and reduce churn. 3G penetration is still only 1.5 percent of the total Chinese mobile subscriber base.

All the operators are opening mobile application stores and need experienced partners: foreign operators can fill this gap.

Many traditional industries such as manufacturing, railway, and healthcare are going through a massive transformation from a labor-intensive to a technology-intensive model. Telecoms is an essential element of this change.

Foreign players should consider the opportunities in these verticals and look at technologies that address their needs, such as smart grid for the electricity sector and e-health for healthcare. These specific solutions would benefit from industry policies and allow foreign players to establish themselves in the market.