China - the industry is reorganised

Telecom industry starts long-awaited reshuffle

The nation's long-awaited streamlining of the telecommunications industry has begun in earnest.

For openers, China Mobile Communications Corp will take over fixed-line operator China Tietong Telecommunications Corp, and the country's regulator yesterday announced a reshuffle of top executives among the largest carriers.

The industry reorganization is expected to make the market more transparent and fair and fasten the process of issuing licences for third-generation, or 3G, services.

After the revamp, China will have three large telecommunications carriers and the country's top two fixed-line phone operators will have mobile networks.

China Mobile, the world's biggest mobile carrier, will have the fixed-line business from China Tietong. China Telecommunications Corp takes over China United Telecommunications Corp's CDMA (code-division multiple access) network, while China Unicom's GSM (global system for mobile communications operations) may be combined with China Netcom.

Wang Jianzhou will remain as president of China Mobile and China Netcom President Zhang Chunjiang will become a vice president at China Mobile.

China Unicom President Shang Bing will become Party Secretary of China Telecom, while China Unicom Chairman Chang Xiaobing will head the Unicom-Netcom entity.

Zuo Xunsheng, chief executive of China Netcom, will be deputy head of Unicom-Netcom, Sina.com reported, citing unidentified sources.

The involved carriers declined to comment on the issue yesterday and said they will reveal more details later.

The industry reorganization will cut telecommunications cost, avoid duplicated network construction and lift phone penetration nationwide.

It will also fast-track the merger of mobile and fixed-line communications, according to a KGI Securities telecommunications report.

Hong Kong-listed China Unicom, China Telecom and China Netcom surged on the Hong Kong Stock Exchange in the wake of the report before trading was halted at the noon break on Thursday. Shanghai-listed China Unicom also jumped more than 5 percent and trade in the company was suspended in the afternoon.

China is seeking to boost competitiveness at fixed-line operators, whose revenue is slowing as more people choose mobile services, Xi Guohua, vice minister of the Ministry of Industrial and Information, said previously.

"The revamp will change the market structure," said Sandy Shen, a Gartner's analyst based in Shanghai. "China Unicom and China Telecom will benefit from it but China Mobile will continue to dominate the market for a period."

It will take 12 to 18 months for the carriers to finish the reorganization and then China will prepare to roll out 3G services, which allow faster video and Web downloads.

China Mobile, whose profit surpasses the combined gains of the other top three carriers, will keep the advantage even after the industry reorganization, according to KGI.

The mergers will boost the companies' spending on networks, a big plus for telecom equipment makers.