Global Insight Perspective | |
Significance | China Unicom and China Netcom have completed their merger. |
Implications | The merger is part of a major government-guided restructuring of China's telecoms industry. |
Outlook | The merger will enhance the overall competitiveness of the combined group by combining the resources and business strengths of Unicom and Netcom in different areas, although the group will face heavy investment requirements.. |
China Unicom (Hong Kong) Limited (China Unicom, formerly known as China Unicom Limited) yesterday announced that its merger with China Netcom Group Corporation (Hong Kong) Limited (China Netcom) had become effective. The company also announced the new board of directors of China Unicom. Chang Xiaobing, the chairman and CEO of China Unicom, will continue to be the chairman and CEO of the merged group. Lu Yimin and Zuo Xunsheng were appointed as executive directors of the company. China Netcom is now a wholly-owned subsidiary of China Unicom and the withdrawal of the listing of the Netcom Shares on the Hong Kong Stock Exchange and the Netcom ADSs on the New York Stock Exchange became effective on 15 October. In addition, the change of the company's name from "China Unicom Limited" to "China Unicom (Hong Kong) Limited" took effect on 15 October. As a result of the merger, the shareholding interests of SK Telecom and Telefónica International in the company will be approximately 3.79% and 4.21% respectively. Kim Shin Bae, the representative of SK Telecom and Cesareo Alierta Izuel, the representative of Telefónica International will join the Unicom Board as Non-Executive Directors of the company.
Outlook and Implications
Netcom is the leading broadband and fixed-line operator in 10 provinces in the northern part of mainland China, including the capital Beijing. Unicom, having sold its CDMA business to China Telecom, will focus on its more profitable GSM operations. Upon completion of the transaction, the merged company will integrate telecoms capabilities in mobile, fixed-line, broadband, data, and value-added services, and is expected to be granted a 3G licence by the government. Based on Unicom and Netcom subscriber data, as at 30 June, the merged company would have a total subscriber base of 259 million customers, including 128 million GSM subscribers, 109 million fixed-line subscribers, and 23.36 million broadband subscribers. The number of sales outlets of the merged company is expected to exceed 18,000, about 5,000 of which were previously operated by Unicom and over 13,000 were operated by Netcom. The merged company is estimated to have approximately 170,000 wireless base stations and approximately 430,000 personal handyphone service (PHS) base stations.
The merged group will aim to create a fully-integrated business and generate synergies in the areas of network resources, sales and marketing, investment and management costs. In particularly, the group has stronger competitive advantages in the 10 provinces in the northern part of China. The group had earlier announced that it would focus on the following strategies:
- Establish a cutting-edge 3G business, enhanced brand image, and core competence
- Leverage on full service advantage to drive product innovation and market expansion
- Fully develop its broadband multimedia business to accelerate the conversion into an information service provider
- Optimise investments and increase network coverage and service levels
- Integrate client and distribution channel resources and enhance marketing efficiencies
- Improve service quality and promote a customer-centric culture