It's difficult to ignore China Mobile. The world's largest wireless carrier as measured by subscribers — 760 million at last count — the company is so successful in its home country that the Chinese government wants to reduce the its domestic dominance by allowing two other state-controlled carriers, China Unicom and China Telecom, to establish a joint venture to build and manage telecommunications infrastructure in the country.
It's understandable, then, that China Mobile has recently expressed interest in flexing its substantial muscle in overseas markets. Chairman Xi Guohua in particular has made no secret of the fact that the state-owned enterprise is ready to explore growth opportunities in North America and Europe. The news comes on the heels of the launch of China's first 4G network, which China Mobile hopes to leverage overseas to build a global footprint and boost profitability.
Could China Mobile pose a serious threat to the likes of Verizon (VZN) and ATT? Analysts say the hurdles are high for entry into the crowded U.S. market.
"Because it lacks spectrum and mobile licenses, it would need to acquire existing operators, buy spectrum in future auctions, or enter the market as an MVNO," says Julian Watson, an analyst at the research firm IHS Technology in London. A mobile virtual network operator, or MVNO, typically buys access to network services from an existing operator at wholesale rates, then resells to its own retail subscribers.
To date, China Mobile's only foreign play is in Pakistan. In 2007, it purchased Paktel for about $300 million. Making a significant acquisition in the U.S. would be difficult, but not impossible.
Japan's SoftBank, which acquired the No. 3 U.S. wireless carrier Sprint (S) in 2012, is expected to make a bid for the No. 4 U.S. carrier, T-Mobile (TMUS), next month. SoftBank is believed to need to combine the two wireless carriers if it hopes to compete head-to-head with Verizon and AT&T, though U.S. regulators have expressed concern that such a merger would reduce competition and negatively impact American consumers.
If regulators sink the deal before the year is out — just as they did with AT&T's proposed $39 billion acquisition of T-Mobile in 2011 — it could open the door to China Mobile negotiating an agreement with T-Mobile's parent company, Deutsche Telekom.
There are other ways to enter the U.S. market. China Mobile's second option is buying spectrum. The U.S. Federal Communications Commission has kicked off its first major auction of wireless airwaves in six years. The most valuable band, low-frequency airwaves in the 600 MHz range currently being used for broadcast TV signals, is scheduled to hit the block in 2015.
China Mobile need not go after the spectrum alone, either. The company could partner with a U.S. wireless carrier to bid for the newly available band. In additional to cost sharing, China Mobile would enjoy compatibility: The 4G standard used in China, known as TD-LTE (Time Division-Long Term Evolution), complements the standard used in the U.S., FD-LTE (Frequency Division-Long-Term Evolution).