MVNOs must meet operator targets or lose their deposits

MVNOs who have signed with China Telecom and China Unicom will lose their security deposit if they don't meet subscriber and business targets for their wholesale partners.

As this report on Sina Tech puts it, the arrangements between new MVNOs and the big three operators suggest they are more like retail partners than independent service providers.

In signing up with an operator, MVNOs must pay a deposit and commit to meeting subscriber sign-up targets and revenue targets.

It seems the interconnection rate is also linked to the MVNO's performance. The infrastructure owners will take a cut of MVNOs' total pre-tax revenue – as much as 40%.  Unicom is reportedly offering network access on a sliding rate on the basis of annual revenue scale.

If the MVNO’s total revenue is below 20m yuan ($3.2m), it gets a 30% discount. This rises to 40% if sales top 200m yuan. China Telecom's rate for the best-performing MVNO result is a 60% discount.

Along with the lack of regulatory protections, these suggest it's not an easy business to be in, even competing against China's high-priced and unloved oligopolies.

But Sina also quotes one MVNO boss who is not deterred. Wang Xianshu, the head of Busonline, points out that for most of the MVNOs, the new service is an add-on to an existing business, such as online retailing, making that business rather than competing directly with the network owners or other MVNOs.