Vodafone Turns East
Vodafone turns East
1. Presentation of the case
Before China’s entry into WTO in 2001, government protected its strategic telecommunication industry and there were two domestic state-owned enterprises in the telecommunication market, CMHK and China Unicom. Whereas, the fixed-line telecommunication was dominated by China Telecom, China Tietong and a smaller fixed-line player, China Netcom.
While the negotiations for WTO were taking place, China firstly agreed to basic telecommunication opening to foreign companies and to the establishment of Joint Ventures in three cities with maximum 25% of foreign stakes within three years and within five year increase to 35% of foreign stakes in seventeen cities. Finally in six years of accession, JVs would be able to lift foreign stakes to 49%. On the other hand, during this time china’s telecommunication sector has undergone major reconstruction which caused the merge of CMHK and China Tietong and the absorption of China Telecom and China Netcom from CHINA Unicom, leaving China with tree telecommunication players each able to offer fixed-line and mobile services.
In 2001, China’s entry in WTO let Vodafone to expand forming an equity alliance with CMHK , investing US $ 2,5 billion in the purchase of 2,19% stake from CMHK. This alliance offered to CMHK the learning how mobile phone standards were regulated worldwide and the roles of international trade. Whereas Vodafone’s superiority is summed up to kea technologies, resources, telecommunication licenses and network infrastructure, creating a powerful competitive advantage. While Vodafone grew steadily in Chinese market, in 2004 it formed a partnership with SmarTone , Hong Kong’s leading mobile operator in multimedia services, which rebranded its name to SmarTone-Vodafone allowing Vodafone to have presence in Hong Kong, too.
In 2005, China Netcom’s 3 percent stake was bought by the largest Spanish telecommunications operator, Telefonica. On the other hand, China
1. Presentation of the case
Before China’s entry into WTO in 2001, government protected its strategic telecommunication industry and there were two domestic state-owned enterprises in the telecommunication market, CMHK and China Unicom. Whereas, the fixed-line telecommunication was dominated by China Telecom, China Tietong and a smaller fixed-line player, China Netcom.
While the negotiations for WTO were taking place, China firstly agreed to basic telecommunication opening to foreign companies and to the establishment of Joint Ventures in three cities with maximum 25% of foreign stakes within three years and within five year increase to 35% of foreign stakes in seventeen cities. Finally in six years of accession, JVs would be able to lift foreign stakes to 49%. On the other hand, during this time china’s telecommunication sector has undergone major reconstruction which caused the merge of CMHK and China Tietong and the absorption of China Telecom and China Netcom from CHINA Unicom, leaving China with tree telecommunication players each able to offer fixed-line and mobile services.
In 2001, China’s entry in WTO let Vodafone to expand forming an equity alliance with CMHK , investing US $ 2,5 billion in the purchase of 2,19% stake from CMHK. This alliance offered to CMHK the learning how mobile phone standards were regulated worldwide and the roles of international trade. Whereas Vodafone’s superiority is summed up to kea technologies, resources, telecommunication licenses and network infrastructure, creating a powerful competitive advantage. While Vodafone grew steadily in Chinese market, in 2004 it formed a partnership with SmarTone , Hong Kong’s leading mobile operator in multimedia services, which rebranded its name to SmarTone-Vodafone allowing Vodafone to have presence in Hong Kong, too.
In 2005, China Netcom’s 3 percent stake was bought by the largest Spanish telecommunications operator, Telefonica. On the other hand, China