Is China Mobile’s cable industry investment possible?

Apparently not as different regulators will limit the cross-investment, said Ovum analyst Jane Wang.

According to a release, there has been speculation recently about the possibility of China Mobile investing in cable operators and funding the upgrade of the cable-TV networks in China to support broadband. However, as they both report to different government agencies (MIIT and SARFT), this is unlikely to happen, according to Ovum.

In a new report, the independent telecoms analyst claims that investment from China Mobile in cable operators would enable China Mobile to gain ownership of a fixed access network, and would provide cable operators with secure capital to upgrade their networks to support digital services. However, although China Mobile needs fixed network assets to complete its services portfolio and cable operators are searching for funds to complete their network upgrades, there are major barriers that are unlikely to be overcome.

Jane Wang, Ovum Senior Analyst and author of the report, commented: “Different regulators will limit cross-investment. Indeed, for China Mobile to become a major stakeholder in the cable industry, a multi-regulator approach would be required”. However, both government agencies will seek to protect their own interests and those of their industries.

“Competition between the two could only be resolved by the central government adopting a national broadband network plan similar to the one in Australia. However, such a plan was not included in China’s 12th Five-Year Plan (2011–2015), released this year”.

China Mobile’s 2011 capex plan focuses on investments in its mobile network. Significant investments in fixed infrastructure and services are not on the agenda.

Small-scale cooperation between China Mobile and cable operators in some cities or provinces has been seen. However, as a listed company, China Mobile must seek stakeholder agreement for the large-scale investment that would be required in a national cable network.

“Cross-industry investment has rarely been allowed among state-owned companies and China Mobile shows no sign of such investment in the near future” concluded Ms Wang.