China's telecoms market opens up to foreign investment

The Chinese government has lifted geographic restrictions on foreign investment and increased the ceiling on asset ownership by overseas companies from 35 per cent to 49 per cent.

The opening up of China’s domestic and international basic telecoms service this month, comes under its commitment to the World Trade Organisation, but also comes ahead of an expected change in the Chinese telecoms landscape next year.

The Chinese government is planning to shake up the local telecoms market as part of the licensing of 3G in country. One of the most likely scenarios would see second placed mobile operator, China Unicom, split up and sold to fixed-line giants China Telecom and China Netcom.

Unicom’s operates a GSM and CDMA network and has dedicated engineering teams for each. So a separation of operations could make it easier for Unicom to find strategic investors for each of the businesses.

Speculation is rife that a merged Unicom CDMA and Netcom network will roll out CDMA2000, while China Telecom will launch WCDMA or TD-SCDMA using Unicom’s GSM network.

Leading carrier China Mobile is widely expected to commercially introduce the homegrown Chinese-air-interface TD-SCDMA, but analysts are not ruling out the possibility that China Mobile will also pursue WCDMA.

However, it is likely that the allocation of 3G licences in China, whenever that happens, will be the only thing to put an end to the rumours, as it will likely be the catalyst for restructuring. The Beijing Olympics in August of next year are seen to be an attractive even to launch 3G services around.

Last month it emerged that Vodafone has plans to use the government led restructuring of the telecoms market to increase its presence in the country. The carrier intends to use its 3.3 per cent holding in China Mobile as leverage to extend its reach in the world’s largest mobile markets.

Vodafone chief executive, Arun Sarin, said that that the Big V’s $13bn stake in China Mobile could be used to take advantage of local opportunities. One of the likeliest options could potentially see Vodafone exchange its holding in Chain Mobile for a bigger stake another company.