Global Insight Perspective | |
Significance | The long-awaited restructuring of the Chinese telecoms market appears closer than ever before. |
Implications | A successful restructuring will undoubtedly spur competition in the market as the resultant telecoms players square up to each other. |
Outlook | Global Insight believes the restructuring will jolt the mobile market as China will effectively be getting a third mobile operator. |
Hong Kong-listed China Unicom Ltd. and China Netcom Ltd. said in statements to the stock exchange that their shares were suspended from trading today pending possible "price-sensitive" announcements. In Shanghai, shares in China United Telecommunications Co. Ltd., which holds a stake in China Unicom Ltd. and is the only listed telecom operator in the mainland, were also suspended.
Separately, China's official Xinhua news agency reported today that China Mobile, the country's largest mobile operator, will merge with fixed-line carrier China Tietong. Zhang Chunjiang, chairman of fixed-line carrier China Netcom will become vice president of China Mobile, Xinhua said. Meanwhile, Wang Jianzhou will remain in his post as president of China Mobile, the paper added. However, China Mobile has not officially confirmed the report.
Outlook and Implications
Global Insight expects China to officially announce its long-awaited telecoms industry restructuring plan as soon as this weekend (see China: 27 March 2008: Where Next for China's Telecoms Industry?). The industry overhaul could result in the creation of three integrated telecoms carriers by merging the existing operators: China Mobile would merge with China Tietong; China Telecom, the largest fixed-line operator, would acquire the CDMA assets of China Unicom—the smaller of the country's two mobile operators; and China Network, the second-largest fixed-line operator, would merge with the remaining of China Unicom, including its GSM assets. The following provides a picture of what the asset and business scale of the new operators could look like following the restructuring:
- China Mobile + China Tietong: The merged group would have extensive nationwide GSM mobile network coverage owned by China Mobile but limited fixed-line infrastructure currently run by China Tietong (the telecoms arm of the Railways Ministry). The group would control approximately 70% of the country's mobile subscribers but only about 5% of the fixed-line and broadband internet subscribers.
- China Netcom + China Unicom's GSM Assets: The merged group would own fixed-line assets in the northern part of the country and China Unicom's GSM network. The group would control approximately 30% of the country's fixed and broadband internet subscribers and about 22% of the total mobile users (China Unicom's GSM subscribers).
- China Telecom + China Unicom's CDMA Assets: The merged group would own fixed-line assets in the southern part of the country and China Unicom's CDMA network. The group would control approximately 60% of the total fixed-line and broadband subscribers but only about 8% of the country's mobile users (China Unicom's CDMA subscribers).