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British Telecom acquires licenses to operate in China

British Telecom’s entry is signalling a shift in China’s approach from the traditional manufacture-focused economy to an innovative one.

Jan 29, 2019 by A. Alfaro
British Telecom acquires licenses to operate in China

British Telecom (BT) has become the first international telecommunications company to receive two licenses to operate in China, the company announced on January 24. The Domestic IP-VPN and Internet Service Provider (ISP) licenses will allow BT to operate in China without intermediaries and bill the customers in local currency.

Shortly after the announcement, the news went viral in Chinese micro-blogging website Weibo. The social media chatter centered on themes like disruption, privacy policies, data safety etc.

Chinese government is reluctant to allow foreign actors in the telecommunications field as it impinges on privacy and data of its citizens. The fact that British Telecom was granted these licenses is really significant, Zuo Pengfei, a scholar from the Chinese Academy of Social Sciences, told Chinese financial media New Business Daily.

In 2016, the Chinese government said it would slowly open the telecommunications sector to other players.

British Telecom’s entry is signalling a shift in China’s approach from the traditional manufacture-focused economy to an innovative one.

“Thanks to cooperation between the governments of the PRC and the UK, we are now able to offer a nationwide service in China that can be scaled up to match the ambitions and needs of our customers. Being able to service and bill locally significantly simplifies the process of delivering connectivity and other communication services. It is what our customers expect from us and we are very grateful for the opportunity to do this as of today, said Bas Burger, CEO of Global Services at BT Group.

By the end of 2018, 86 foreign institutions got permission from the ministry to invest in the sector, according to a Chinese government report.

BT entered the Chinese market in 1995 and has expanded its presence to 330 cities in China. The company has cooperation agreements with China Mobile and China Unicom among others. The customers of BT include Procter & Gamble, Novartis, Reuters and Unilever.

BT Shanghai, which was granted the licenses, was legally registered in China on October 29, 2015 with a capital of CNY 10 million, according to the research company Tianyancha. The shares of the company are split between BT Hong Kong Limited and a Shenzhen-based company, Huaxia Chengzhi (深圳市华夏城智管理咨询有限公司).

On September last year, the company expanded beyond Shanghai. According to Zuo Pengfei, the Domestic IP-VPN license will help BT to serve businesses and internal networks. BT can now offer large scale local area networks (LAN) to other companies. The Internet Service Provider (ISP) license will allow BT to offer services to individuals. Does BT’s license acquisition pose a threat to China Mobile, China Telecom and China Unicom?

BT will primarily focus on broadband service, which is not the main source of profit for any of the three companies. They should not feel threatened for now, said Zuo Pengfei. To provide broadband service, BT still needs to build the infrastructure. It is still early days to tell whether BT´s entry will dovetail a price war.

“China´s main operators are very mature, and competition is fierce as it is,” he said. He believes BT´s entry may stimulate competition and lead to an improvement of the overall services. At least, “customers will have more options”, Zuo said.

Last year, OFCOM, the UK's communications regulator, published a report on the quality of different providers. According to the report, 79% of BT´s customers were satisfied with the service, a tad below the overall average of 80%. But customers were particularly satisfied with BT´s aftersales.

Zuo Pengfei told New Business Daily that netizens need not worry about the privacy issues. BT must follow Chinese laws and regulations. BT is ‘unlikely’ to monitor users conversations. However, many technical problems, mainly network security, have to be addressed. “This has been an important first step for UK-China relations. These issues have certainly been discussed and both parties will surely find the adequate solutions,” Zuo said.

A. Alfaro

A. Alfaro is a Beijing-based freelance reporter. He focuses on China's politics, culture and society. He can be reached at varofaro@gmail.com. 

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