China Telecom Inks Reseller Deal

China's underdog mobile operator is mounting a scrappy bid to wrest market share away from longtime market leader China Mobile. In its latest coup, China Telecom is teaming up with the nation's No. 2 electronics chain to help sell its CDMA-based 3G phones.

The deal puts the telecom operator in more than 1,100 Suning electronics retail stores and should help China Telecom bridge the gap between it and China Mobile, which has nearly 550 million subscribers, compared to China Telecom's 70 million.

"Before we had many problems increasing our distribution channels. This time by cooperating with Suning, we should be able to successfully break China Mobile's hold on the channels," said a China Telecom employee, who didn't want his name used.

The cooperation will enable Suning to sell China Telecom handsets and calling plans in its 1,100-plus outlets across the country.

Suning chairman Zhang Jindong said that by the end of 2009, the two companies had already set up trials in 11 provinces and cities. But previous cooperation efforts had focused on handset sales, while the recent agreement expands cooperation to let Suning act as an agent for 3G, 2G, broadband, and landline services.

Suning has let telecom operators set up booths in its stores before, with the workers provided by the telecom companies. Under the terms of this latest agreement, however, the stations will be manned entirely by Suning employees.

China Telecom said that 3G customers typically purchase cell phones together with a calling plan, turning telecom operators into key handset retailers. For China Telecom to compete with China Mobile in handset sales, it needs to increase the number of channels it has for reaching customers.

China Telecom offers service plans at around 20,000 points around the country, compared to 80,000 for China Mobile. An employee for China Telecom blamed the discrepancy in part on China Mobile requiring distributors and agents to sign contracts prohibiting them from working with other telecom companies. Suning made no such agreement, however.

At the end of May, China Telecom had 6.528 million 3G customers and China Mobile 9.32 million. However, in both May and June China Telecom added more than 1 million new 3G customers.