On May 17, 2013, M88 app Ministry of Industry and Information Technology (“MIIT”) published the Notice of the Ministry of Industry and Information Technology on Launching the Pilot Program for Mobile Communications Resale M88 app (MIIT Notice No.[2013]191) (“Notice”) with two attachments, i.e., the Pilot Program for Mobile Communications Resale M88 app (“M88 app Program”) and the Application Documents and Examination Procedures with respect to the Pilot Program for Mobile Communication Resale M88 app (“Examination Procedures”). This heralds M88 app formal launch of mobile communications resale, after soliciting public opinions for a period of four months.
Main Content of M88 app Program
1. Definition and Classification of Mobile Communications Resale M88 app
As defined under the Pilot Program, Mobile communications resale M88 app (“Resale M88 app”) refers to such M88 app activities that a reseller purchases mobile communications services from a basic telecommunications M88 app operator who owns a mobile network, repackages the services with its own brand and then sells same to end users. The Resale M88 app does not include the resale of mobile satellite communications service.Different from the basic telecommunications M88 app operators, the mobile communications resale enterprises running the Resale M88 app (“Resale Enterprises”) do not build their own wireless networks, core networks, transmission networks and other mobile communications network infrastructures, instead they must build their customer service systems and may build their M88 app management platforms as well as billing, accounting and other M88 app supporting systems as needed.
The Resale M88 app is classified as Class II basic telecommunications M88 app in the Pilot Program, and will be monitored by reference to the provisions on value-added telecommunications M88 app.
2. Qualifications for M88 app Enterprises
Pursuant to the Pilot Program, the Resale Enterprises shall first meet the requirements for operating value-added telecommunications business set out in the Telecommunications Regulations of the People’s Republic of China and the Administrative Measures for Telecommunications Service Licensing. In addition, the Resale Enterprises also need to satisfy the following requirements: (1) the Resale Enterprises shall be privately-owned (as opposed to state-owned) enterprises established in accordance with laws. The registered capital contributed by private investors must account for not less than 50% of the total registered capital of such Resale Enterprises and the single largest shareholder of each of such Resale Enterprises shall be a privately-owned enterprise (excluding foreign-invested enterprises as well as enterprises established by investors from Taiwan, Hong Kong and Macau. For a domestic privately-owned enterprise listed overseas, the percentage of equity held by the enterprise’s foreign investors shall be less than 10% and its single largest shareholder shall be a Chinese investor); (2) the Resale Enterprises shall have professional staff corresponding to their needs of the business operations; (3) the Resale Enterprises shall have the capacity to provide long-term services to users; (4) the Resale Enterprises shall have necessary premises and facilities; (5) the Resale Enterprises shall have the capability to ensure the security of their networks and information; (6) the Resale Enterprises shall enter into commercial contracts for the Resale Business with basic telecommunications business operators.
M88 app Examination Procedures furM88 appr specifies M88 app detailed criteria of above requirements illustrated in M88 app Pilot Program.
3. Procedures M88 app Application, Examination and Approval
Under the Pilot Program and the Examination Procedures, the application, examination and approval procedures for the Resale M88 app are substantially the same as those for the value-added telecommunications M88 app. Specifically, the Resale Enterprises applying for cross-region Resale M88 app shall submit their applications to the MIIT and those applying for inner-province Resale M88 app shall submit their applications to provincial administrations of communications. The Resale Enterprises applying for cross-region Resale M88 app also need to complete filing procedures with local administrations of telecommunications located in all relevant regions before conducting their M88 app in such region.
4. OM88 appr Rules
In order to ensure the successful implementation of the Pilot Program, it also sets forth the following provisions for the Resale Enterprises, the basic telecommunications M88 app operators and the MIIT:
(1) The Resale Enterprises shall satisfy certain requirements if they propose to conduct pre-paid Resale M88 app, and the period of the pre-paid fees shall be no more than two years. All service quality claims brought by the Resale Enterprises’ users as well as all M88 app disputes between the Resale Enterprises and basic telecommunications M88 app operators shall be resolved by telecommunication authorities or their affiliated agencies.
(2) A basic telecommunications M88 app operator shall enter into cooperation agreements with more than two Resale Enterprises in conducting the Resale M88 app, and such agreements shall not include any exclusivity clause. The quality of the services sold by basic telecommunications M88 app operators to the Resale Enterprises may not be lower than the quality of their own M88 app services. The wholesale prices of the services offered by a basic telecommunications M88 app operator to the Resale Enterprises shall be lower than the lowest retail prices of the same types of service offered by such basic telecommunications M88 app operator in the public market.
(3) The MIIT will determine and assign the range of telephone numbers to basic telecommunications M88 app operators for use in the Resale M88 app, and will allocate short telephone number resources to the Resale Enterprises for their client service.
5. Time Schedule M88 app Pilot Program
As provided under the Notice, the candidates of the Pilot Program may apply to participate in the pilot M88 app during May 17, 2013 to July 1, 2014, and the Pilot Program will end at December 31, 2015.
Brief Comments on M88 app Program
1. Facilitate Emergence M88 app Chinese Virtual Operators
The launch of the Pilot Program changes the MIIT’s long-time held negative attitude toward virtual operators. The Resale M88 app is actually not a new concept. It was initially appeared in the Telecommunications Regulations of the People’s Republic of China issued in 2000 and many foreign countries have established a mature M88 app model for virtual operators. However, the Resale M88 app was deleted from the Classified Catalogue of Telecommunications M88 app revised in 2003, which meant that the telecommunication M88 app operators cannot apply to conduct the Resale M88 app. Therefore, before the issuance of the Pilot Program, the virtual operators did not have a legitimate status to conduct the Resale M88 app.
The Pilot Program provides virtual operators with legitimate market status. Pursuant to the Pilot Program, the Resale Enterprises only purchase relevant mobile communication service from basic telecommunication M88 app operators. They do not actually operate any mobile communication service or possess any basic network facilities and infrastructures such as wireless networks, core networks and transmission networks. Therefore, the Pilot Program is actually a pilot arrangement for virtual operators and provides a good opportunity for the emergence of Chinese virtual operators. It is predictable that the MIIT may open more resale M88 app relating to other types of telecommunication M88 app in the future and benefited from this, the M88 app of Chinese virtual operators will be further developed and expanded.
2. Promoting Marketing Competition but Its Actual Effect Remains to be Seen
It is well-known that the mobile communication M88 app is currently monopolized by three largest basic telecommunications operators, namely China Mobile, China Unicom and China Telecom. The Pilot Program allows the Resale Enterprises to participate in the operation of mobile communications M88 app as virtual operators, which apparently encourages the competition in the mobile telecommunications market. Although the Pilot Program sets forth some mandatory regulations on the cooperation between basic telecommunications operators and the Resale Enterprises, the eventual market effect of the Pilot Program still depend on the details of the resale contracts entered into between the Resale Enterprises and basic telecommunications operators. Currently, the attitude of the three largest basic telecommunications operators toward the Pilot Program is still unclear. Therefore, the potential market effect coming from the entry of privately-owned enterprises into mobile telecommunications market still remains to be seen.
3. M88 appeign Investors’ Participation Subject to Limitations
Although the Pilot Program classifies the Resale M88 app as the Class II basic telecommunications M88 app which will be monitored by reference to the provisions on value-added telecommunications M88 app, foreign investors’ participation into the Resale M88 app is still subject to limitations due to the qualification requirements for the enterprises applying to conduct the pilot M88 app set forth in the Pilot Program. As required by the Pilot Program, a qualified Resale Enterprises shall be privately-owned enterprise of which not less than 50% of the registered capital is contributed by private investors. In addition, the single largest shareholder of each of such Resale Enterprises shall be a privately-owned enterprise funded by private investors, and both foreign-invested enterprises and enterprises established by investors from Taiwan, Hong Kong and Macau are generally excluded. For privately-owned enterprises listed overseas, the percentage of equity held by their foreign investors must be less than 10%. It can be seen that the MIIT currently does not allow any foreign investor to directly invest in enterprises conducting the Resale M88 app. What is unclear is whether the MIIT shall put the same strict limitations on foreign investors’ indirect participation in the Resale M88 app such as via VIE. Answering this question requires further analysis on the background of those approved Resale Enterprises.
