Reform is in the air in Beijing

23 Jan 2008

After years of stasis, the Ministry of Information Industry and the National Development and Reform Commission looks set to embark on a sweeping reform of China's carrier sector.
In the opaque manner of Chinese officialdom, no formal announcement has been issued and no details have been confirmed.

But a series of remarks by senior officials of those key agencies and undenied press reports confirm that the long-awaited revamp is on its way.

Unquestionably, it is being driven by the lopsided competition between the operators. China Mobile last year snared more than 70% of total growth and profit, while fixed-line rivals Telecom and Netcom for the first time suffered a net loss of customers.

The mooted plan, known as '3+1', would see China Mobile merge with minnow Railcom and Unicom combine with Netcom while selling its CDMA network to Telecom. All three will be given full-service licenses. ChinaSat, the '1' in the formula, has already become the sole satellite carrier after absorbing Sinosat and OrientSat in a deal just completed.

The reorganization had been held up for years awaiting the launch of 3G, seen as a natural starting point for reform. But with the indigenous TD-SCDMA standard ready in only trial form for the August Olympics, and China Mobile obliterating its rivals, exasperated officials evidently have decided to wait no longer. An NDRC research paper last December which recommended proceeding now with carrier reform, and dealing with 3G later, gave a clue to their thinking.

Both Ma Kai, the head of the NDRC, which handles economic planning, and his MII counterpart Wang Xudong, made widely-reported remarks at end-of-year work meetings in which they nominated telecom restructuring as a major task in 2008.

Yet that is no guarantee it is going to happen quickly. Plans need to drawn up, shareholders won over and legislation passed. Meanwhile, rumors sweep the capital that the MII will itself be reformed in the current shakeup of the bureaucracy.

Change will be some time coming.

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