David Oliver_

Will Competition Save WVAS Providers in China?

David,

I am not convinced that the arrival of 3G will make much difference to the current gloomy situation that WVAS providers face. China Mobile will continue to dominate the mobile landscape unless, in an unlikely scenario, they get lumped with a TD-SCDMA license. Whoever gets a TD-SCDMA license is unlikely to be a serious contender in the 3G landscape due to it being a technology that clearly has problems, a lack of economies of scale for handsets and network equipment and the fact that Nokia, Motorola and Samsung etc are not likely to develop leading edge or stylish handsets based on this standard. It will be left to China's numerous handset design houses to come up with mediocre "me too" TD-SCDMA phones.

All of the mobile operators in the new 3G world will continue to be Chinese SOEs and deep down their mentality is "why let someone else make money if we can make it ourselves?" There are many examples of Chinese SOEs working with partners but once they understand the business/ technology then they try to do it themselves. This is what is happening with the independent WVASs now - China Mobile needed them while it couldn't provide the services themselves. Now, as they think they can do more themselves, they will make life harder for the WVASs and eventually try to kick them out altogether or maybe keep a handful of subservient partners.

Is it likely that China Mobile can provide better content compared to the independent MVAS providers? Probably not. Does it matter? No. When you are a monopoly/ duopoly it doesn't really matter whether the consumer gets the best content or service.

The fact is that the MVASs don't have the ability to create distinctive, compelling content and it will be easy enough for China Mobile to deal directly with the MTVs, Viacoms, News Corps, SMGs and CCTVs of the world, especially if mobile TV does become a killer app.

BusinessWeek Recommends PacificNet (PACT)

Its hard to know what these guys are really up to as they seem to be investing in a diverse range of businesses. Based on my own experience of dealing with Chinese telcos it can be very hard getting paid on time and generally avoid getting screwed. They are monopolies and think that they can do what they want. If PacificNet were to be positioned as a systems integrator to the telcos then look at the fates of AsiaInfo and UT Starcom.