Vodafone Turns East

Question 1. How has China’s entry into the WTO affected Vodafone’s development in China and Hong Kong? How has it affected foreign telecommunications investment in general?

Answer: In 2001, after practicing a policy of protectionism, China entered into WTO with the aim to uplift its international trade. Also according to WTO treaties Hong Kong became a member of WTO in its own right despite being a Special Administrative Region (SAR) of China. At the same time of entry of China into WTO in 2001, Sir Christopher Gent, the CEO of Vodafone at that time, announced their expansion plan into Chinese market and opening of new offices in Beijing and Hong Kong. They formed an equity alliance with China Mobile Hong Kong Limited (CMHK). For this alliance Vodafone initially purchased 2.19pc stake from CMHK at a cost of $2.5 bn. The stake was increased to 3.2 pc in 2002 by purchasing further shares worth of US $ 750mn. Because of this alliance and Vodafone’s strong international strategy and technologic expertise made CMNK strong and have brought new opportunities. Companies such as China Unicom etc. faced enormous competition and had to change their strategy.

The integration of Vodafone and CMHK was strengthened by increasing cooperation in many business areas like new product development, better customer service and increased target market.

In addition to steady growth in the Chinese market, Vodafone also aimed at Hong Kong market by creating a partnership with SmarTone, which is a leading mobile operator in multimedia services in Hong Kong. SmarTone became SmarTone-Vodafone, which allowed Vodafone to create its presence in Hong Kong market. Due to this partnership agreement both companies collaborated in delivering products and services to international travelers and domestic customers.

For entering into WTO China agreed to open up the basic telecommunications to foreign companies for international trading and also agreed to the