China shakes up telecoms market

China has revealed plans to shake up the country’s telecoms sector, by reducing the number of state-owned operators to just three.

Under the plan, China Mobile, the world’s biggest mobile operator in terms of subscribers, will merge with fixed line carrier China Tietong Telecommunications.

China Telecom will take over the CDMA network of China Unicom, the smaller mobile operator, as well as the business of China Satellite Communications.

The GSM network of China Unicom will be merged with fixed line operator China Netcom.

Many expect the move to be a preemptor to the allocation of 3G licenses in the country, which are expected to be tendered before the Olympics in the summer.

China Mobile said, “The Company believes that reform of the structure of the telecommunications sector will rationalize the allocation of existing network resources, achieve comprehensive business operations and lead to a rational and healthy competition framework.”

Cynthia Leung, senior analyst at Ovum, said; “We believe the resulting solution has met this goal, even though no one single operator will gain all the benefits and despite the fact that internal competition between the merged entities may exist. The restructuring plan avoids the complication and interoperability issues of network rental and network separation, which inevitably can add to cost increase in the end.”

“We believe in the short term China Mobile will remain in its leading position and face few challenges. From now on, its biggest competitor will be China Telecom, not China Unicom anymore; whereas China Unicom will confront China Telecom directly. We expect the consolidation will take at least 6 months. By 2009, the converged fixed and mobile broadband networks will take off and its development accelerates rapidly.”