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Abu Dhabi, UAESaturday 21 July 2018

US moves to block China Mobile in American market

Move comes amid growing trade frictions between Washington and Beijing

A China Mobile store in Guangzhou, Guangdong province, China. The US wants to stop China Mobile offering its services in America. Alex Lee/File Photo
A China Mobile store in Guangzhou, Guangdong province, China. The US wants to stop China Mobile offering its services in America. Alex Lee/File Photo

The US government moved on Monday to block China Mobile from offering services to the US telecommunications market, recommending its application be rejected because the government-owned firm posed national security risks.

The Federal Communications Commission (FCC) should deny China Mobile’s 2011 application to offer telecommunication services between the United States and other countries, the National Telecommunications and Information Administration (NTIA) said in a statement posted on its website.

“After significant engagement with China Mobile, concerns about increased risks to US law enforcement and national security interests were unable to be resolved,” said the statement, which quoted David Redl, assistant secretary for communications and information at the US Department of Commerce, which NTIA is part of.

China Mobile, the world’s largest telecom carrier with 899 million subscribers, did not immediately respond to Reuters’ request for comment.

The move by US President Donald Trump’s administration on China Mobile comes amid growing trade frictions between Washington and Beijing. The United States is set to impose tariffs on $34 billion worth of goods from China on July 6, which Beijing is expected to respond to with tariffs of its own.

And ZTE, China’s No. 2 telecommunications equipment maker, was forced to cease major operations in April after the US slapped it with a supplier ban saying it broke an agreement to discipline executives who conspired to evade US sanctions on Iran and North Korea. ZTE is in the process of getting the ban lifted and announced a new board last week.

China Mobile Communications, a state-controlled firm, owned almost 73 per cent of China Mobile as of December, according to Thomson Reuters data.

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China Mobile’s shares fell 2.6 per cent on Tuesday morning to their lowest in more than four years.

But Ramakrishna Maruvada, a Singapore-based analyst with Daiwa Securities, said the impact of the ruling on China Mobile’s business is “very tiny” since it derives most of its income from the domestic market.

“This doesn’t move the needle,” Mr Maruvada said, adding the timing of the decision was to be viewed in the context of the US-China trade frictions.

In its recommendation, the NTIA said that its assessment rested “in large part on China’s record of intelligence activities and economic espionage targeting the US, along with China Mobile’s size and technical and financial resources".

It said the company was “subject to exploitation, influence and control by the Chinese government” and that its application posed “substantial and unacceptable national security and law enforcement risks in the current national security environment”.

US senators and spy chiefs warned in February that China was trying, via means such as telecommunications firms, to gain access to sensitive US technologies and intellectual properties.