China Opens Mobile Telecoms Market To Private Capital, Alibaba Unit And Rivals To Compete With China Mobile (CHL), China Unicom (CHU) and China Telecom (CHA)

In a bid to break the monopoly of major operators and stimulate innovations in business patterns of the world’s largest wireless market, China announced Thursday that it will hand out the first batch of virtual telecom operator licenses before the end of the year, China Daily reports.

China's telecom regulator said that it awarded licenses to 11 private companies to run mobile telecom businesses based on services leased from China's state-run carriers.

The pilot program will allow private capital to further enter the telecom industry, offer discounts or more attractive deals, and boost competition in the $213 billion market. Private enterprises will be able to buy mobile telecom services from the nation’s three existing carriers and resell them to end customers, according to a statement posted on the website of the Ministry of Industry and Information Technology.

"It's a milestone. It will draw private investment, and stimulate competition and innovation in the telecoms sector... giving a wide range of consumers greater choice and better service," the ministry said in the statement.

China is the world's largest mobile phone market in terms of user numbers. The country has about 1.15 billion mobile users as of the first quarter, according to the latest data from MIIT.

The nation's "big three" state-run telecom carriers, China Mobile Ltd. (NYSE:CHL), China Unicom (Hong Kong) Ltd. (NYSE:CHU) and China Telecom Corporation Ltd. (NYSE:CHA), have signed 47 contracts in total with privately owned companies in developing the value-added services to mobile subscribers, according to MIIT.

China Mobile, which recently inked a deal with Apple Inc. (NASDAQ:AAPL) to sell its iPhones, dominates the domestic market with more than 760 million subscribers, followed by China Unicom and China Telecom, with 280 million and 185 million users, respectively.

A reform blueprint unveiled by the Chinese Communist Party's top leaders last month at the end of the Third Plenum called for a greater role for private capital in a number of state-dominated industries, including transportation, banking and telecom.

The 11 companies that won licenses include a subsidiary of e-commerce giant Alibaba Group Holding Ltd. and its rival Beijing Jingdong Century Trading Co., which runs the popular JD.com e-commerce service.

The other companies to receive licenses were DiXin Tong Inc., Bashi Zaixian Ltd., Zhejiang Lianlian Technology Co., Telling Telecom Holding Co., Ltd. (SHE:000829), Funtalk China Holdings Ltd., Beijing Huaxiang Lianxin Technology Ltd., Beijing Bewinner Communications Co., Ltd (SHE:002148), Soshare Network Technology Co. and Telephone World Digital Group.

The new private companies entering China’s telecom market will capture about 10 percent of the nation’s mobile-phone connections by 2018, according to estimates from Nicole McCormick, an analyst at researcher Ovum, Bloomberg reports.