China Mobile Opens $5.8B Bank Account

With an eye on the potentially lucrative mobile banking services sector, China Mobile Ltd. (NYSE: CHL) has announced a significant investment in the Chinese bank that's to be its key finance applications development partner.

The carrier, through its regional subsidiary Guangdong Mobile, is taking a 20 percent stake in the Shanghai Pudong Development Bank Co. (SPD Bank), a move that is costing it 39.8 billion Chinese yuan renminbi (US$5.83 billion).

The bank, which offers a range of corporate and retail financial services, has 33 branches and 565 outlets throughout mainland China, along with five subsidiary companies and an office in Hong Kong.

China Mobile also announced a Strategic Cooperation Memorandum of Understanding with SPD Bank, under which the new partners "intend to closely cooperate in the joint development of mobile finance and mobile e-commerce businesses."

That will involve the joint development and marketing of mobile payment applications, mobile bank cards, mobile funds transfer capabilities, and other finance services, as well as R&D efforts into new mobile finance technologies.

China Mobile notes that as mobile Internet usage increases, "mobile phone payments and mobile e-commerce will become one of the major means that people make their spending in the future," a trend that presents "unprecedented development opportunities to mobile telecommunications operators in China."

And the carrier believes that taking a stake in SPD Bank, which "has experience in mobile phone payments," is the right approach to this opportunity, as it should "better align the interests of the parties concerned and promote the development of mobile e-commerce to the greatest extent." The carrier also believes it's a good investment in its own right, and that its 20 percent stake should "provide a favourable return."

China Mobile is keen to further develop its application creation and delivery capabilities -- it launched its Mobile Market app store in August 2009 -- and is one of the figurehead operators involved in the recently formed Wholesale Applications Community (WAC). (See MWC 2010: Operators Form WAC Pack for Apps Push and China Mobile's App Adventure.)

The two companies will also promote each other's existing services, a move that will give SPD Bank a great deal of exposure, as China Mobile now has more than 527 million customers and is pushing hard to establish its 3G services, for which it had 3.9 million customers at the end of January. (See China Pumps $15B Into 3G.)

China Mobile is building out its 3G network, using the country's home-grown TD-SCDMA technology, but is already planning its migration to Long Term Evolution (LTE). (See Motorola's Shanghai Hope, APAC Operators Commit to LTE, and China Mobile Fast-Tracks TD-LTE .)

The move is the latest by China's three telecom services giants to establish prominence in the mobile applications market. It is also a clear sign that mobile finance is set to be a key competitive battleground among the rival wireless players in China as well as elsewhere.

— Ray Le Maistre, International Managing Editor, Light Reading