Telecom restructure in a tangle
By Li Weitao (China Daily)Updated: 2007-03-30 09:20
Wang Xiaochu is frank and outspoken. The chairman and CEO of China Telecom will grab any opportunity to express his desire for a restructuring of China's telecom industry.
This week, Wang reiterated his company's desire to buy a mobile network owned by China Unicom. And this time he found a good excuse: the voice call revenue of China Telecom, a fixed-line carrier, fell for the first time last year.
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China Mobile operates a network based on the GSM standard while China Unicom operates two networks GSM and CDMA. China Telecom and China Netcom have yet to be allowed to offer mobile phone services.
Unicom's two mobile networks compete with each other and have not been performing very well compared to China Mobile. Selling one network could help it improve its finances and focus on a single network, and could boost competition in the industry, says Wang, who submitted a proposal to regulators in December 2004 for such an arrangement.
Although regulators have kept mum about such proposals, China Telecom has been firm in its stance. It has been reportedly talking with Unicom on the pricing of the CDMA network China Telecom wants to buy. Unicom has denied these reports.
But signs of a reshuffle are evident. Earlier this year, Unicom split its marketing unit into two separate divisions overseeing promotions of CDMA and GSM services. That was viewed by many as a prelude to a split of Unicom.
Zhu Lijun, deputy general manager of China Netcom and a deputy to the National People's Congress (NPC), submitted a proposal in March, calling for the reduction of the number of top telecom operators from four to three. The reason: China Mobile is growing too strong. Last year, it controlled about 70 percent of the newly generated revenue and profit in the telecom industry.
A consolidation could create two operators on a par with China Mobile.
Shi Jixing, an industry veteran, said a consolidation is possible but the decision-making process could be as lengthy.
"It's true, the necessity for a reshuffle is increasing. But the process could be quite complicated as the regulators are getting too involved," says Shi, vice-chairman of the China Mobile Communications Association.
The State-owned Assets Supervision and Administration Commission (SASAC), the National Development and Reform Commission (NDRC) and the Ministry of Information Industry, all have a say in the consolidation issue.
"I think it could be a good option for Unicom to sell its CDMA network. But it's up to Unicom to decide. Regulators should not get involved too much," Shi said.
Shi was one of the vocal advocates for the introduction of the CDMA technology in China. He made several proposals to the State Council in the 1990s for adopting CDMA to "boost competition" in the domestic telecom industry.
But Shi did not expect that Unicom would be mandated to adopt CDMA. "In fact I hoped a greenfield operator (instead of Unicom or China Mobile) would adopt CDMA," he said.
Running networks based on two different standards have put Unicom under great pressure. The CDMA network, formally launched in 2002, has just starting turning a profit and the growth of Unicom's GSM service has been sluggish in the past years. That has frustrated regulators, who hoped Unicom would break China Mobile's monopoly.
Unicom vice-president Li Zhengmao had earlier indicated that regulators would decide how to develop the telecom industry "at the right time" as China Mobile is stretching its dominance.
But the restructuring will not be an easy decision as even different government bodies disagree on the issue, as they do over 3G licensing, Shi said.
In January 2005, the SASAC held a surprise press conference after media reports that Unicom might be split. SASAC dismissed the reports as rumors but added it had yet to work out a "specific" plan for telecom industry reform.
That has left the door open for a possible consolidation, industry observers say.
Wang Guoping, an analyst with China Galaxy Securities, said several factors are adding to the uncertainty. For instance, Hong Kong-listed China Mobile plans to list on the mainland, which could be followed by China Netcom and China Telecom.
"If they get listed on the mainland soon, the possibility of a restructuring could diminish," Wang said.
(China Daily 03/30/2007 page15)
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