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Chinese telco shares suspended amid reshuffle reports

26 мая 2008

China Mobile to acquire China Tietong; press reports detail management changes.

Shares of major Chinese telecoms operators were suspended Friday amid reports the government is finally about to announce the long-awaited industry reshuffle.

Fixed-line operators China Telecom and China Netcom, and mobile operator China Unicom's shares ceased trading pending the release of "price sensitive" information, according to statements filed with the
Hong Kong stock exchange.

China's Xinhua news agency reported that the country's dominant mobile operator China Mobile will acquire fixed-line provider China Tietong – the telecoms arm of the country's railway industry.

"The merged group would have extensive nationwide GSM mobile network coverage owned by China Mobile but limited fixed-line infrastructure currently run by China Tietong," said Jing Li, a senior telecoms analyst at Global Insight, in a research note.

She said that the combined companies would have 70% of the country's mobile users but only about 5% of
China's fixed-line and Internet subscribers.

The report also said that China Netcom's general manager Zhang Chunjiang will become deputy manager to Wang Jianzhou at China Mobile.

What's more, sources claim in a report by Reuters that Unicom's president Shang Bing will be moved to China Telecom.

Reports in January claimed that China Unicom's GSM operation would merge with China Netcom, while its CDMA business would be combined with China Telecom.

Along with the merged operations of China Mobile and China Tietong, the country would be left with three telecoms giants each offering both fixed and mobile services.

A widely-held view is that the reorganisation will pave the way for awarding 3G licences, one or more of which will use the country's home grown TD-SCDMA standard.

Global Insight said the outcome would have a positive impact on competition and overall industry growth in

"The impact on the mobile market will be particularly significant, as
China will effectively gain a third mobile operator through the splitting up of China Unicom's mobile network assets and customer base between China Telecom and China Netcom," said Li.

"Greater competition will stimulate both mobile subscriber growth and market penetration rate," she added.

Still, it could be some time before China Mobile feels the effects of increased competition.
As of the end of April it boasted 583.5 million subscribers, compared to Unicom's 168.53 million.

What's more, if the reshuffle takes place as it's expected to, with Unicom's GSM and CDMA businesses being split between two fixed-line operators, then the new entities will each have even fewer mobile customers.

It was reported this week that at the end of April China Unicom had 125.43 million GSM users, and 43.10 million CDMA users.

The reorganisation will be welcomed particularly by
China's fixed-line providers, which have seen steady declines in subscribers as customers migrate to affordable mobile plans.

Indeed, earlier this week Dow Jones Newswires said that China Telecom and China Netcom saw their fixed-line users decline for the ninth and tenth successive months respectively.

Источник: Total Telecom

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