China Mobile: World’s Largest Telecom Can’t Access U.S. Market –For National Security Risks

National security concerns raised after jump in cyber attacks against US

JUL 3, 2018 (BE2C2): The Trump administration has cited national security concerns to deny China Mobile entry into the US, dealing a blow to one of China’s biggest state-owned telecoms providers amid a looming trade war between the two countries.

The National Telecommunications and Information Administration, part of the US Department of Commerce, said late on Monday it had recommended that the Federal Communications Commission block a 2011 application by China Mobile to offer telecoms services in the US.

China Mobile, officially China Mobile Communications Corporation, is a state-owned telecommunication corporation that provides mobile voice and multimedia services through its nationwide mobile telecommunications network across mainland China.

NTIA said the telecom’s application raised “substantial and unacceptable national security and law enforcement risks in the current national security environment”.

The Chinese telecom behemoth has more subscribers (902 million as of June 2018) than the population of the U.S. and Western Europe combined but shares of the world’s largest mobile carrier trade at almost one-third of global peers’ valuation.

The recommendation from the Trump administration comes amid a broader attack on China’s international trade practices — China Mobile makes most of its revenue domestically and may be less vulnerable to trade blocks.

The White House is poised to implement tariffs on $34bn of imports from China on Friday, targeting what it calls systematic theft of US intellectual property and forced technology transfer. Beijing is set to respond by implementing $34bn of its own sanctions on US goods on the same day..

China Mobile had applied for authorization to offer voice and data services between the US and its international locations, in an effort to expand its global network. At the time, the company said it did not intend to offer voice or mobile services within the US. According to Bloomberg, the company cannot add too many users any more because its domestic network capacity is already stretched.

Although Washington has previously granted other Chinese state-owned companies access to its telecoms network, the NTIA argued that “the sophistication and resulting damage of the Chinese government’s involvement in computer intrusions and attacks against the US has evolved over time”.

The NTIA declared that the “minimal security features” of the US telephone and cellular networks meant that China Mobile would have the ability to “target, alter, block, and re-route traffic” if it gained access to the network.

“The Chinese government could therefore seek to use China Mobile . . . to exploit the public-switched telephone network in the US and increase intelligence collection against US government agencies,” the filing said.

After Presidents Barack Obama and Xi Jinping agreed in 2015 to refrain from government-sponsored cyber-espionage for commercial purposes, US experts noted a decline in Chinese hacking. However, the US’s Section 301 investigation into technology theft by China accused Beijing of continuing such attacks in order to further state industrial policy.

The NTIA ruling largely referred to pre-2015 assessments of China’s cyber-espionage against the US. Accompanying evidence containing “more recent assessments” was classified.

China Mobile was put together in a deal led by Goldman Sachs from China’s sprawling telecoms bureaux for a dual $4.2bn listing in Hong Kong and New York in 1997. At the time it was China’s largest initial public offering, and considered a model for the “privatization” of state-owned assets. The cash raised was used to upgrade China’s 3G telecoms network.

The pushback against China Mobile comes amid a period of heightened scrutiny on Chinese technology and telecoms groups in the US. Last month, 28 members of Congress wrote to Betsy DeVos, US education secretary, condemning partnerships between Chinese telecoms group Huawei and US universities, saying they “may pose a significant threat to national security”.

China Mobile is the world’s largest mobile telecommunications corporation by market capitalization and is listed on both the NYSE and the Hong Kong Stock Exchange.

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