China remakes carrier sector

Robert Clark
telecomasia.net

China has unveiled its long-awaited telecom industry restructure, merging the six state-owned carriers into three.

But officials once more stopped short of setting a timetable for the introduction of 3G, saying that licenses will be issued after the restructure is completed.

In a revamp that has been widely reported since early this year, fixed-line leader China Telecom will acquire China Unicom's CDMA business and China Satcom.

The new Unicom will be formed by combining its GSM business with the smaller fixed-line operator China Netcom. China Mobile, whose market dominance has driven the reforms, will take over China Tietong, a small fixed-line company set up by the Ministry of Railways.

Each of the three carriers will receive a 3G license, although no details have been issued on what kind of technology each will adopt.

The changes, jointly announced by the Ministry of Industry and Information (MII), the State Reform and Development Commission (SRDC) and the Ministry of Finance on Friday morning, are the biggest reforms to China's booming telecom sector since the formation of the MII in 1998.

The statement said the rapid growth of mobile had created "new problems in the structure and resource allocation in the telecom industry". The widening gap between the operators was making the competitive structure "seriously unbalanced," it said.

Last year China Mobile posted a profit of 87.1 billion yuan ($12.5 billion) - almost half as much again as the combined profit of the Telecom, Netcom and Unicom.

Almost certainly the reforms were agreed on several months ago, but it has taken some time to agree on the sensitive appointments of top executives at the new carriers.

The senior positions in the state-controlled corporations are all Communist Party appointments.

Friday's announcement confirms China Mobile chairman Wang Jianzhou and China Telecom chairman Wang Xiaochu in their current posts. China Unicom chairman Chang Xiaobing is head of the "preparatory group" driving the Netcom merger and should retain his post.

The most prominent move is that of Netcom chairman Zhang Chunjiang to China Mobile, where he becomes party secretary. Unicom president Shang Bing is the new party secretary at China Telecom, while China Tietong chief Zhao Jibin and Unicom vice-president Li Zhengmao will also become Mobile VPs.