China Mobile Wins Approval for Taiwan Subsidiary

China's biggest mobile phone network operator won approval to set up a subsidiary in Taiwan, a first for a Chinese telecommunications company.

But China Mobile will not be able to use the subsidiary to invest in Taiwan's telecommunications sector just yet. The Taiwan government still forbids such investments.

China Mobile's new subsidiary, Zong, was originally intended as the Taiwanese subsidiary through which China Mobile could buy a 12 percent stake in Far EasTone Telecommunications, one of Taiwan's largest mobile service providers.

But Taiwan still outlaws Chinese ownership of telecommunications systems for reasons of national defense. Taiwan and China separated in 1949 amid civil war. Beijing has threatened to take the island by force if it moves toward formal independence.

"China Mobile very much hopes that Taiwan, in its next round of announcements on mainland [China] corporate investment in Taiwan, will open to telecommunications sector investment. When that time comes, China Mobile will apply to use Zong to invest in Far EasTone," China Mobile said on Tuesday.

For now, the new subsidiary will be used to source telecommunications gear and handsets on the island, an official at Taiwan's economics ministry said.

China Mobile and Far EasTone already work together closely on technology issues and the boards of both companies have already agreed to the 12 percent investment, ahead of approval by regulators.

Last month, the two companies agreed to jointly develop a next-generation TD-LTE (Time-Division Long Term Evolution) mobile network in Taiwan for testing purposes. Far EasTone is already operating a test network based on TD-SCDMA (TD Synchronous Code-Division Multiple Access), a 3G technology created in China to reduce the nation's reliance on foreign technologies. TD-LTE is the newer technology, a generation ahead of TD-SCDMA, and is meant to provide speedy broadband wireless for mobile Internet browsing on smartphones and laptops.

Beijing tapped China Mobile to lead its efforts in TD technology. The company's rivals in China do not use the technology.

Zong is the brand China Mobile uses in Pakistan to promote its mobile telecommunications subsidiary there.

Companies in Taiwan and China have become more active in seeking out partnerships with each other ever since Taiwan President Ma Ying-jeou was inaugurated in May of last year. His political party is seen as pro-Beijing, while the previous party in power was pro-Taiwan independence.

Taiwanese chip maker United Microelectronics has already set plans to buy China's He Jian Technology, in what will be the first deal of its kind between the two places once formalized. Taiwan in February said chip makers could make such investments, but they still had to apply for permission from Taipei.

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