Wang Xiaochu is frank and outspoken. The chairman and CEO of
China Telecom will grab any opportunity to express his desire for a
restructuring of China's telecom industry.
This week, Wang reiterated his company's desire to buy a mobile
network owned by China Unicom. And this time he found a good
excuse: the voice call revenue of China Telecom, a fixed-line
carrier, fell for the first time last year.
The fall underlines the problems fixed-line operators are facing
as voice goes mobile. And that, according to Wang, would be a
"positive" sign for the introduction of licensing for
third-generation (3G) mobile phone services.
China Mobile operates a network based on the GSM standard while
China Unicom operates two networks GSM and CDMA. China Telecom and
China Netcom have yet to be allowed to offer mobile phone
services.
Unicom's two mobile networks compete with each other and have
not been performing very well compared to China Mobile. Selling one
network could help it improve its finances and focus on a single
network, and could boost competition in the industry, says Wang,
who submitted a proposal to regulators in December 2004 for such an
arrangement.
Although regulators have kept mum about such proposals, China
Telecom has been firm in its stance. It has been reportedly talking
with Unicom on the pricing of the CDMA network China Telecom wants
to buy. Unicom has denied these reports.
But signs of a reshuffle are evident. Earlier this year, Unicom
split its marketing unit into two separate divisions overseeing
promotions of CDMA and GSM services. That was viewed by many as a
prelude to a split of Unicom.
Zhu Lijun, deputy general manager of China Netcom and a deputy
to the National People's Congress (NPC), submitted a proposal in
March, calling for the reduction of the number of top telecom
operators from four to three. The reason: China Mobile is growing
too strong. Last year, it controlled about 70 percent of the newly
generated revenue and profit in the telecom industry.
A consolidation could create two operators on a par with China
Mobile.
Shi Jixing, an industry veteran, said a consolidation is
possible but the decision-making process could be as lengthy.
"It's true, the necessity for a reshuffle is increasing. But the
process could be quite complicated as the regulators are getting
too involved," says Shi, vice-chairman of the China Mobile
Communications Association.
The State-owned Assets Supervision and Administration Commission
(SASAC), the National Development and Reform Commission (NDRC) and
the Ministry of Information Industry, all have a say in the
consolidation issue.
"I think it could be a good option for Unicom to sell its CDMA
network. But it's up to Unicom to decide. Regulators should not get
involved too much," Shi said.
Shi was one of the vocal advocates for the introduction of the
CDMA technology in China. He made several proposals to the State
Council in the 1990s for adopting CDMA to "boost competition" in
the domestic telecom industry.
But Shi did not expect that Unicom would be mandated to adopt
CDMA. "In fact I hoped a greenfield operator (instead of Unicom or
China Mobile) would adopt CDMA," he said.
Running networks based on two different standards have put
Unicom under great pressure. The CDMA network, formally launched in
2002, has just starting turning a profit and the growth of Unicom's
GSM service has been sluggish in the past years. That has
frustrated regulators, who hoped Unicom would break China Mobile's
monopoly.
Unicom vice-president Li Zhengmao had earlier indicated that
regulators would decide how to develop the telecom industry "at the
right time" as China Mobile is stretching its dominance.
But the restructuring will not be an easy decision as even
different government bodies disagree on the issue, as they do over
3G licensing, Shi said.
In January 2005, the SASAC held a surprise press conference
after media reports that Unicom might be split. SASAC dismissed the
reports as rumors but added it had yet to work out a "specific"
plan for telecom industry reform.
That has left the door open for a possible consolidation,
industry observers say.
Wang Guoping, an analyst with China Galaxy Securities, said
several factors are adding to the uncertainty. For instance, Hong
Kong-listed China Mobile plans to list on the mainland, which could
be followed by China Netcom and China Telecom.
"If they get listed on the mainland soon, the possibility of a
restructuring could diminish," Wang said.
(China Daily March 30, 2007)