Tue, May 27, 2008 - Page 11 News List

China’s restructuring plan calls for telecom mergers

INDUSTRY OVERHAULFixed-line and mobile operators would be combined into three large groups as part of a bid to create more competitive rivals to China Mobile

AP , BEIJING

China’s phone companies will merge into three large groups in a sweeping, long-awaited government restructuring of its giant telecommunications market that could lead to billions of dollars in new orders for foreign equipment suppliers.

A plan announced over the weekend calls for energizing competition by bringing together mobile and fixed-line operators.

It says once mergers are complete, licenses for next-generation services will be issued — a step that would require heavy spending on new equipment.

The announcement said mergers were expected to take place as quickly as possible but gave no time frame.

The plan is aimed at creating more robust competitors to China Mobile Ltd (中國移動通信), which dominates China’s market and is the world’s biggest carrier by number of subscribers, with more than 400 million accounts.

It would result in three groups based around the parent companies of China Mobile and fixed-line carriers China Telecom (中國電信) and China Netcom (中國網通).

Fixed-line carriers are struggling to attract new business at a time when first-time customers are passing up traditional service in favor of mobile phones.

China Mobile’s smaller rival, China Unicom (中國聯通), is also struggling to attract users to its network.

The merger plan highlights the communist government’s continued dominant role in the market even after an earlier restructuring that broke up China’s phone monopoly into smaller competitors.

The plan released by China’s telecoms regulator, the Ministry of Information Industry, directly applies to the state-owned parent companies of Chinese carriers. But it is expected to affect subsidiaries that have public shareholders abroad and equipment vendors such as AB LM Ericsson, Alcatel-Lucent SA, China’s Huawei Technologies Co (華為技術) and Nokia Siemens Networks, a partnership between Nokia Corp and Siemens AG.

The plan would have no direct effect on foreign carriers, which are barred from competing in China’s telecoms market.

The mergers would set in motion the awarding of licenses for third-generation (3G) service that supports wireless video, Web surfing and other services, the government statement said.

Nokia and other suppliers are anticipating billions of dollars in orders for 3G equipment.

China has the world’s biggest population of mobile phone users, with some 520 million accounts, and the government says that should reach 600 million soon.

The plan’s rollout began on Friday with the announcement that China Mobile’s parent, China Mobile Communications Corp (中國移動通信集團), will acquire China Railway Communication (鐵通), also known as Tietong.

The plan also calls for China Telecommunications Corp (中國電信集團), parent of China Telecom, China’s main fixed-line carrier, to buy a mobile network from China United Telecommunications Inc (中國聯通), Unicom’s parent company.

The rest of Unicom would be folded into Netcom’s parent, fixed-line China Network Communications Group Corp (中國網絡通信集團公司).

The remaining carrier, China Satellite Communications Corp (中國衛通) would be taken over by China Telecommunications.

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