China Telecom, Alibaba Partner to Sell Smartphones

China’s third-largest mobile operator, China Telecom, has partnered with Chinese e-commerce giant Alibaba to sell inexpensive smartphones to consumers who live in the country’s smaller cities and rural areas. Through this partnership, Alibaba will have access to China Telecom’s 186 million subscribers. The mobile phones, called Tianyi Taobao Shopping Handsets, include six different models that come installed with an app enabling users to access Alibaba’s Taobao online shopping platform, or eight other models that will run Alibaba’s home-grown mobile phone operating system, YunOS, which will provide users with an Alibaba account for shopping, cloud-based storage and other preloaded services. The costs of the devices will range from CNY 299.00 (US $48.20) to CNY 699.00 (US $112.69), and purchasers of the handsets will receive four months of 2G data at no cost.

According to recent reports, China Telecom lagged behind the country’s other operators, particularly China Mobile, in increasing its subscriber growth in 2014. The operator attributed this to its inability to expand its 4G network coverage because the government had not granted the required licenses for FDD-LTE last year. Although FDD-LTE 4G licenses have now been issued and we expect the carrier to aggressively expand its 4G network coverage, China Telecom is smart to partner in initiatives that target its current 2G customers to increase their data use. While it is clear that Alibaba will win from this partnership—through increased retail sales from online shopping, as well as through the potential growth of its operating system YunOS—China Telecom could see increased revenue through customers’ demands for larger data packages, as this whole initiative stems from the rise of mobile shopping in China, especially in rural areas where shoppers are turning to the online marketplace more often.

“Targeting 2G customers may not seem like a good source of revenue for mobile operators, particularly in many developed markets, but the sheer size of China’s mobile market makes targeting this group of subscribers lucrative, especially if the operator has been slow to attract 3G/4G customers in areas where it has this infrastructure already built. Revenue from 2G service in the country’s rural areas is a good supplement until the China Telecom is ready to build out infrastructure in these areas.”

Kamely Hayes,

Managing Editor,

The Tarifica Alert

The above item appeared in a recent issue of The Tarifica Alert, a weekly resource that analyzes noteworthy developments in the telecoms industry from around the world. To access all of the latest articles and issues or to speak with the research team: Click here.