The raw numbers involved make this hugely significant. China has begun reorganising its telecommunications industry and Chinese telecom stocks are soaring as a result.
As a first step, Beijing has decided to allow China Mobile Communications, the world’s largest mobile-phone company with a near-70 per cent share of China’s mobile market, to start fixed-line services, taking over fixed line company Railcom as part of a wave of changes aimed at spurring competition.
Key to the overhaul also is the carve-up China Unicom, China Mobile’s smaller rival, details of which are expected to emerge shortly, and a range of other key reforms.
Essentially, China — in a very Chinese manner – has decided to consolidate its industry and create a more level playing field, in a sector dominated by four players that have evenly split mobile and fixed-line services. The move, notes Reuters, precedes the issuance of licenses to offer faster 3G telecom services – a potential boom for global equipment vendors.
China Mobile will take control of fixed-line operator China Tietong Telecommunications, according to the state-run Xinhua News Agency, which also reported a reshuffle of executives among the largest carriers.
China Unicom, China Mobile’s smaller rival, China Telecom and China Netcom Group — all state-controlled and listed carriers – surged on the Hong Kong stock exchange on the report, before trading was halted around the midday break, reports Bloomberg, noting that among other theories, analysts have speculated Unicom would sell its networks to China Telecom and China Netcom as part of the revamp, allowing the fixed-line operators to offer mobile service.
From the point of view of western manufacturers and investment companies, analysts say a broad industry revamp could unleash billions of dollars in spending for equipment makers such as Motorola and Nortel, and leave China with three giants offering wireless and fixed-line services.
But some in the industry might be hoping for too much, too quickly. As Lex noted last November, investors and equipment providers hoping to supply the world’s biggest mobile market had better be prepared for another long wait.
The delays up to now in proceeding with a telecoms overhaul have mostly been due to problems with China’s home-grown technology standard, Time Division-CDMA. Consultants report continuing hitches. Applications are limited (TV and video conferencing, for example, are not available) and there are insufficient handset models.
Chinese regulators are seeking to boost competitiveness at fixed-line operators, whose revenue is slowing as more people choose mobile services. China also aims to provide capital resources to the reorganised companies as it prepares to roll out 3G wireless services.
Representatives from all four operators said they plan to release statements later Friday, without providing more details. When those details arrive, you can bet there’s going to be a lot of it. As Reuters noted: “Investors will need time to grapple with the specifics of a blueprint that begins with personnel changes, moves on to policy, and culminates in acquisitions that will likely link investment banks, government officials and corporations.”