Why China Mobile Is Launching An MVNO In The U.K.

Last week, China Mobile (NYSE:CHL), the world’s largest wireless carrier in terms of subscribers,  launched a mobile phone service called CMLink in the United Kingdom, marking the first time the company has introduced services outside its home turf. The launch of the service, which will operate as a mobile virtual network operator (MVNO) with capacity leased from BT’s network, could signal that the company has growing ambitions on the international stage. Below, we take a look at why China Mobile could be expanding beyond the broader Chinese market.

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Trefis has a $65 price estimate for China Mobile, which is about 30% ahead of the current market price.

The Offering Will Be Targeted At Chinese Tourists, Expats

China Mobile’s primary goal with the service is to target Chinese tourists and expats in the U.K. with a range of pay-as-you-go wireless phone services. For instance, the company says that about 433k British-Chinese people live in the U.K., with another 82k Chinese students also residing in the country. During the first half of 2017, an estimated 115k Chinese tourists visited the U.K., marking an increase of 47% year-over-year. The company is looking to woo these customers with specific features such as free calling to ~880 million China Mobile users in China. The carrier also intends to waive roaming charges for subscribers traveling to China, Hong Kong or the European Union. The carrier is also looking to increase customer stickiness, by rewarding users who continue with the service with additional data each month.

A Precursor For Bigger Things To Come? 

The wireless market is becoming increasingly globalized, as large carriers look to diversify their revenue streams and seek out higher-value customers.  For instance, in the U.S., Sprint is majority owned by Japanese telecom company Softbank, while T-Mobile is majority owned by Germany’s Deutsche Telekom. For China Mobile, the move could help it gain knowledge of mature markets, without having to make significant investments. The cost of entering the market is likely to be quite low, as China Mobile will be leasing capacity from BT, which operates the largest 4G network in the U.K. There is a possibility that the deal could be a precursor to a larger and more capital-intensive international deal if China Mobile sees success with the MVNO. The carrier has a healthy cash position of over $70 billion, including available for sale financial assets, making international investments and/or acquisitions possible.