China Orders 6 Telecoms to Merge Their Assets

China is restructuring its telecommunications industry by merging the six major players and creating three companies to provide both telephone and Internet access throughout the country. From Bloomberg:

Under the plan, the parent of China Telecom will buy a mobile phone network from the parent of China Unicom, which in turn will merge with the company that controls the China Netcom Group, the Ministry of Industry and Information said in a statement on Saturday. China will issue three third-generation wireless licenses after the overhaul is completed, it said.

The revamp will help China Telecom and Netcom expand their operations to compete against China Mobile in China, the world’s biggest wireless and Internet market by users.

China had 583.5 million mobile phone users at the end of April, exceeding the combined populations of the United States and Japan. But the $105 billion industry has room to expand because 6 out of 10 people in China still do not own mobile phones and 84 percent of the population lacks Web connections.

Read also the Economist’s analysis of the restructuring:

The reorganisation had been expected for years, but rumours of an imminent decision swept the Hong Kong and Shanghai markets on May 23rd, provoking a panic that continued until May 27th. The shares of China Telecom, China Unicom and China Netcom were suspended, and those of China Mobile fell in value by 10%, or $31 billion. (The other two operators are unlisted.)

The main purpose of the plan is to create a more competitive industry—which means, in practice, taking China Mobile down a peg or two. It will gain a fixed-line arm, but that is no recompense for what it will give up: its lock on the massive mobile market, encompassing two-thirds of Chinese customers and an even higher share of new subscribers. Under the new rules, which have yet to be spelled out, it will face regulatory pressure to allow rivals into its market.

May 30, 2008 1:46 PM
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Categories: Economy, Sci-Tech