Chinese regulators are finalizing plans to overhaul the telecommunications industry under a package of reforms that is expected to consolidate six big state-run operators into three service providers.
The will see the emergence of three entities providing a full-range of services, unlike the current setup that has operators divided among fixed-line, cellular and other services, The Wall Street Journal reported Friday in its online edition, citing an outline of the restructuring carried by state-run media earlier in the week. The industry reforms, many analysts believe, will clear the way for the government to issue third-generation cell-phone licenses later this year.
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The plan is likely to be scheduled for formal approval at the annual session of the National People's Congress, China's legislature, which gets underway March 5. A formal announcement is expected shortly after the session concludes two weeks later.
"We think the government will decide on restructuring, but commercial terms of the transactions will be left for the market to determine," Citibank analysts wrote in a research note.
Among beneficiaries of the shakeup, Citi says the most likely winners are China Telecom and China Unicom.
The reforms will weigh negatively on China Mobile, the world's largest cellular provider by subscribers, analysts say. The carrier, which reported 376.4 million cellular at the end of January, is expected to face intensified competition in the short term.
"(China Mobile) should shine after restructuring talk settles and the market refocuses on fundamental growth," Citi said.
The total number of cellphone users in China rose by 87 million to 547 million in 2007.
On the Hong Kong Stock Exchange at midday, shares of China Mobile were down 1.5%, China Telecom eased 1.3% and China Unicom rose 0.6%.
China's state-run media said Thursday that the restructuring plans would see China Mobile merge with the small fixed-line carrier China Tietong Telecommunications Corp.
The second big move would see China Telecommuncations parent of China Telecom, acquire a wireless network from Unicom parent China Untied Telecommunications. The third big move would see the GSM network of China United merge with the parent of China Netcom.
Source: Cellular News.