Unfinished Business – China Mobile’s Corruption Woes Roll On

Unfinished Business – China Mobile’s Corruption Woes Roll On – Economic Observer Online

By Liao Jiehua (廖杰华) , Chen Yong (陈勇) and Wu Qiaofa (吴侨发)
Issue 634 ,Aug 26, 2013  
Executives continue to fall to corruption charges at the world’s largest mobile phone operator. On Aug 19, Xu Long (徐龙), chairman of China Mobile’s Guangdong branch (Guangdong Mobile), was placed under investigation for “serious disciplinary violations.” Economic Observer learned that as far back as 2010, the Zhejiang Provincial Commission of Discipline Inspection had begun investigating Xu; and auditing authorities have also looked into him on five separate occasions. But nothing concrete was ever discovered.
However, everything began to unravel when two other high China Mobile officials, Li Xinze (李欣泽) and Sun Lian (孙炼), were interrogated in April and July respectively. These men have reportedly led authorities to many new clues implicating Xu Long.Signs of Trouble
A source from China Mobile’s Zhejiang branch who worked with Xu when he was stationed there said that his management style was subdued and that he was always very cautious. The source says though that this changed when Xu went to Guangdong, where he became “high-profile and greedy.” “It’s a real pity,” the source said. “He was actually a very talented man.”
There have long been signs that Xu was in trouble.
A middle-level manager in China Mobile’s Shenzhen office told the EO that Xu’s predecessor Li Gang (李刚) had initiated a policy of competitive internal promotion at Guangdong Mobile that was open and transparent. But soon after Xu took over, he abolished this policy and reinstituted direct appointment. This adversely impacted the internal style of work and the staff’s attitude.
On Feb 28, 2012, Lu Xiangdong (鲁向东), former deputy general manager of China Mobile and a close associate of Xu’s, was taken away for questioning by the Jilin Provincial People’s Procuratorate. Xu Long was also investigated and questioned at that time, but when China Mobile announced that Lu Xiangdong was under investigation on Mar 2, 2012, Xu’s name wasn’t mentioned.
Then on Dec 14, 2012, China Mobile announced that Xu had resigned as executive director of Guangdong Mobile, but he still remained chairman and general manager of the branch.
The EO confirmed from multiple sources that in July, before Xu was detained and investigated, he mysteriously disappeared for several days. After he resurfaced, he claimed that he’d gone to Shanghai to treat an illness.
Skimming Off the Top
Xu Long’s wife Ye Qian (叶倩) has also been detained. A source from Guangdong told the EO that she had started her own company and held shares in another. Both of these businesses received many orders from China Mobile through Xu Long.
The large profits of Guangdong’s China Mobile branch provided Xu and his wife with ample opportunity to find illicit earnings. The branch has been China Mobile’s most profitable provincial level company, earning 81 billion yuan in revenue in 2012 with a net profit of 23.8 billion yuan. It accounts for about a third of the China Mobile Group’s revenue and is home to about 20 percent of the group’s users.
A source close to the Zhejiang branch of China Mobile says that Guangdong Mobile does procurement worth about 20 billion yuan every month and that Xu Long could unilaterally veto any purchase below 50 million yuan.
According to another source, a builder in Shenzhen once won the bidding process to build a base station for Guangdong Mobile. But for some reason, Xu later invalidated the deal. Guangdong Mobile had to pay a considerable penalty fee for the cancellation.
“Last year Guangdong Mobile invested nearly 10 billion yuan just in building base stations,” the source said. “Obviously, the space for diverting assets through equipment bidding is big enough to get lost in.”
Another area where assets are easily transferred is value-added services like SMS, MMS and data services. This area is China Mobile’s “money-making king” and also a breeding ground for corruption. Several China Mobile officials have fallen for crimes related to data services. Sun Lian (孙炼), former general manager of the planning department of Guangdong Mobile, was detained and placed under investigation in July. He was in charge of value-added services for two years.
Before Sun, there was Li Xinze (李欣泽), the general manager of China Mobile’s Guangzhou office. He was detained for investigation in April. A source close to the Commission of Discipline Inspection revealed that Li’s crimes came from the time he served as general manager of the marketing department in the Guangzhou office.
Li Xinze and Sun Lian both had close relationships with Xu Long and are considered the final straws in building a case against him.
All these cases seem to be part of a bigger cleanup at China Mobile. Since December of 2009, 14 executives from the company have been investigated for corruption.