From a purely commercial perspective, blocking China Mobile from accessing the U.S. market is unlikely to make any material impact since the bulk of its income is derived from the domestic market.
A post by the U.S. National Telecommunications and Information Administration (NTIA) on its website states, the Federal Communications Commission (FCC) should block China Mobile from offering its services in the U.S. telecommunications market since the Chinese-government owned firm poses a national security risk to the United States.
“After significant engagement with China Mobile, concerns about increased risks to U.S. law enforcement and national security interests were unable to be resolved,” reads the statement.
The development marks a strengthening of views by the U.S. President Donald Trump’s administration that Chinese investments in the U.S. pose national security risks to the United States. It also comes midst growing trade frictions between Washington and Beijing.
On July 6, the U.S. is set to impose tariffs on $34 billion worth of goods China goods; Beijing has said it will respond with tariffs of its own.
With the news reaching the market, China Mobile’s shares fell by 2.6% on Tuesday morning to their lowest levels in more than four years.
As per Ramakrishna Maruvada, an analyst with Daiwa Securities, even if China Mobile was blocked from accessing the U.S. market, its business impact is “very tiny” since the Chinese-state owned firm derives most of its income from the domestic market.
“This doesn’t move the needle,” said Maruvada.
In its recommendation to the FCC, the NTIA stated 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.”
Further, China Mobile is “subject to exploitation, influence and control by the Chinese government” said the NTIA and that its application posed “substantial and unacceptable national security and law enforcement risks in the current national security environment”.
In February 2018, U.S. intelligence agencies and U.S. Senators had warned that China was trying to gain access to sensitive U.S. technologies and U.S. intellectual properties through means, which include telecommunications firms.