China - restructuring

China plans three telecom giants

China plans to create three telecom giants as it seeks to bring balance back to an industry where mobile operators have seen the fastest growth by far, the government and state press said on Tuesday.

Under the plan, the world's biggest mobile operator China Mobile will acquire fixed-line operator China Tietong Telecommunications Corp, the information industry ministry said in a statement over the weekend.

China Telecom, an operator of fixed lines, will take over a mobile network of China Unicom, the smaller of the nation's two key mobile phone operators, and most business of smaller player China Satellite Communications Corp.

The remainder of China Unicom will be encouraged to merge with fixed line operator China Netcom, according to the ministry.

The objective of the restructuring is to bring about three competitors of roughly comparable strength, the government statement said.

It is also aimed at redressing the imbalance between rapidly growing mobile phone operations and the fixed line business, which is actually seeing declines in subscriber numbers, it said.

Once the restructuring is finalised, the government will issue three licences for third generation (3G) mobile services.

The arrival of the 3G licences, which allows more various advanced functions such as the use of broadband wireless data via mobile devices, is set to usher in a buying spree of new network equipment, state media reported on Tuesday.

The revamp will probably take five months to complete, the Beijing Youth Daily said, citing a research note by Guotai Jun'an Securities, which has close contact with the operators.

In a sign of how lopsided the market is, official figures showed that by the end of last year China's fixed line users fell by 2.3 million to 365.4 million while mobile phone subscribers surged by 86.2 million to 547.3 million.

China Mobile, the world's biggest mobile network operator by subscriber numbers, raked in 87.1 billion yuan (12.5 billion dollars) in net profits in 2007, twice as much as China Unicom, China Telecom and China Netcom combined.