China Telecom in $4bn CDMA expansion

Chinese carrier China Telecom, which as part of recent restructuring moves in the nation’s communications sector is assuming control of China Unicom’s CDMA network, has announced an expansion tender worth US$4bn. 

The firm has indicated that the money will be spent expanding the mobile network – China’s smallest – to rural areas, rather than being used to improve capacity and quality of service in areas of existing coverage.

Chinese newspaper the South China Morning Post reported that the budget for expansion would be $4bn.

The Chinese state revealed its restructuring plans for the telecoms sector in May this year, signalling its intention to reduce the number of state-owned carriers to 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.

As well as Unicom’s CDMA network, China Telecom will take over the business of China Satellite Communications.

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

Many viewed the move as 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 rationalise 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.”