Rejection from FCC Looms Over China Mobile's U.S. Business

The U.S. Commerce Department issued a petition Monday urging the FCC to deny China's telecoms giant entry into the U.S. markets.

Anna Vodopyanova
    Jul 02, 2018 5:17 PM  PT
Rejection from FCC Looms Over China Mobile's U.S. Business
author: Anna Vodopyanova   

The U.S. Commerce Department has urged the Federal Communications Commission to block the U.S. entity of China Mobile Ltd. (NYSE: CHL) from offering its services in the United States.

The petition, issued by the National Telecommunications and Information Administration (NTIA), stated that, though an open market benefits consumers and businesses, "the deepening integration of the global telecommunications market has created risks and vulnerabilities in a sector replete with a broad range of malicious activities."

Among its concerns about China Mobile, the NTIA arged, was that because "China Mobile is subject to exploitation, influence, and control by the Chinese government," the company would "pose substantial, unacceptable national security and law enforcement risks" and go against the public interest.

China Mobile, a subsidiary of state-owned China Mobile Communication Corp. (CMCC), is one of the world's largest telecom companies. The Hong Kong-based company trades publicly in both New York and on the Hong Kong Stock Exchange.

In September 2011, China Mobile International (USA) Inc. first applied to the FCC to enter the U.S. telecom market. Among the services China Mobile planned to offer were data roaming, data center and cross-connect, cloud storage, mobile virtual network operator, and common-carrier services.

In March 2013, the company repeated its request after a New York State Assemblyman, Anthony Brindisi, urged the FCC to reject the application on grounds of national security.  "The extreme delay in granting the application is causing significant and unwarranted harm to China Mobile USA's business operations," the company said in its letter to the FCC at the time.

Nearly seven years later, the telecom company's application still has not been accepted. In its petition to the FCC today, the government, through the NTIA, recommended to deny China Mobile's application.

The delay on the deal comes as the administration seeks to clamp down on Chinese telecom companies. American businesses, for example, have been urged to avoid doing business with Huawei Technologies Co. Ltd. In addition, ZTE Corp. was fined $1.4 billion and had to appoint a new board after it was caught breaching sanctions against trading with Iran and North Korea. In January, the Trump administration also blocked a $1.2 billion offer from the Chinese FinTech unicorn, Ant Financial Services Group, to acquire MoneyGram International Inc., a Dallas-based money transfer firm.

The stock of China Mobile closed Monday at $44.27 per American depositary share, down 12 cents. Its shares jumped more than 3 percent to $45.72 per share in after-hours trading, after the publication of the NTIA's statement in late afternoon.

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The stock of China Mobile closed at $44.72 per share Monday, then rose more than 3 percent to $45.72 per ADS in after-hours trading.

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