A planned merger of China's phone companies into three large groups signals a long-awaited government restructuring that could lead to billions...
BEIJING — A planned merger of China’s phone companies into three large groups signals a long-awaited government restructuring that could lead to billions of dollars in new orders for foreign equipment suppliers.
The plan for China’s giant telecoms market, announced over the weekend, calls for energizing competition by bringing together mobile and fixed-line operators. 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.
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The plan is aimed at creating more robust competitors to China Mobile, which dominates China’s market and is the world’s biggest carrier by number of subscribers.
It would result in three groups based around the parent companies of China Mobile and fixed-line carriers China Telecom and China Netcom.
The competitive environment will “dramatically change” over time, but China Mobile is unlikely to lose its dominance for at least one to two years, said Fitch analyst Jinqing Li.
Even after that time, “China Mobile’s strong financial profile also provides further support in the face of evolving industry developments and uncertainties,” Li said in a report.
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, also is having trouble attracting users.
The merger plan highlights the communist government’s continued dominant role in the industry 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 investors abroad and to create new commercial opportunities for equipment vendors such as Sweden’s Ericsson, Franco-American company Alcatel-Lucent, China’s Huawei Technologies and Nokia Siemens Networks, a partnership between Finland’s Nokia and Germany’s Siemens.
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, or 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 Friday with the announcement that China Mobile’s parent, China Mobile Communications, will acquire China Railway Communication, also known as Tietong.
China Telecommunications, parent of China Telecom, the nation’s main fixed-line carrier, would buy a mobile network from China United Telecommunications, Unicom’s parent company.
The rest of Unicom would be folded into fixed-line China Network Communications Group, Netcom’s parent.
The remaining carrier, China Satellite Communications, would be taken over by China Telecommunications.
In trading Monday in Hong Kong, China Mobile shares fell 8.2 percent on investor worries about greater competition. Its shares fell 3.8 percent Friday on speculation ahead of the weekend announcement.