China will issue three
licenses for high-speed third-generation mobile phone services
and called for a merger of China Unicom and Netcom, two of its
four biggest telecoms providers, in a long-awaited industry
The government said on Saturday it would also call on China
Telecom, the country's biggest fixed-line telecoms carrier, to
purchase wireless telecoms company Unicom's CDMA network,
fleshing out details of the restructuring following an initial
announcement on Friday.
ABN AMRO has valued the Unicom network at HK$40 billion
China's 1.3 billion people can now look forward to joining
others in advanced economies who already enjoy blazing-fast
Internet access, games and a host of multimedia content from
maps to music on their cell phones.
The 3G licenses and the industry revamp are also set to
unleash billions of dollars in spending for network gearmakers
such as Ericsson, Motorola, Nokia, Nortel and Siemens, as newly
merged firms expand to compete.
Although analysts are quick to point out that a full launch
of 3G services is years away, allowing three nationwide
providers increases choice and promises to hold down user fees.
On a corporate level, it will also help address the
perennial complaints of fixed-line firms at being left out of
the world's largest and fastest-growing major telecoms market.
Analysts say heightened competition would in theory benefit
users by also enhancing service and content quality.
"The move will help foster a more balanced competition
landscape for the industry, create a fairer playing ground."
said Michael Meng, an analyst with Citigroup.
The government's Saturday statement (http://www.gov.cn)
gave no time frame for implementation and did not specify
whether the restructuring would involve the state-owned
companies or their listed units, but analysts have said mergers
were likely to involve the parent firms.
The move is also expected to foster competition in China's
mobile sector, where the parent of China Mobile, the world's
largest mobile service provider by subscribers, has long
overshadowed Unicom, the smaller of China's mobile duopoly and
hobbled by a split between two different networks: CDMA and
COMPETITION FOR CHINA MOBILE
"The move aims to address China Mobile's dominance and
Unicom can finally focus on developing a single network, which
will boost efficiency, and GSM is traditionally a stronger
network," said Sandy Shen, research director at Gartner IT, a
China announced an initial series of moves on Friday,
including leadership changes and a directive for China Mobile
to take over a small fixed-line operator, China Railway
Communication Co Ltd, which has assets of 42.4 billion yuan
($6.1 billion) and employs 72,000 staff across China.
The news sent many telecoms stocks soaring in both Hong
Kong and on the mainland.
Hong Kong-listed shares in Unicom and Netcom jumped 11 to
12 percent before they were suspended from trade. China Telecom
rose 7 percent while the Shanghai-listed shares of China United
Telecommunications, part of the Unicom group, rose 5.1 percent.
China Mobile fell 3.8 percent as competition fears weighed.
Analysts said news of the restructuring, a subject of much
debate and speculation over the past several years, would
remove some of the uncertainty over shares in the sector,
although many key details had yet to emerge, including a
"It's a long-anticipated move which is finally taking
place, and it also means the end of a restructuring trade,"
said Wendy Liu, telecoms analyst at ABN AMRO.
"I'll expect China Telecom, Unicom and Netcom shares to be
suspended for a longer while as they will have to work out the
details. But when all the stocks resume trading, investors will
be looking at the fundamentals again, and whoever's the most
capable to execute will win."
($1=7.801 Hong Kong Dollar)
(Additional reporting by Edwin Chan; Editing by Jean Yoon)