China Mulling Telco Mergers for 3G
The Chinese government is considering several different
scenarios for merging Chinese telcos so that it can launch
3G services in the country. Under current plans, the Chinese
government will only give out two 3G licenses, while there
are six telecom carriers.
Under one plan, China Mobile Communications Group would
be merged with fixed-line operator China Network Communications
Group and China Telecommunications Group with China United
Telecommunications Group. The other plan involves merging
China Mobile with China Satellite Communications, China
Network with China United and China Telecommunications
with China Railway Communications, according to the plan
published by the South China Morning Post, based in Hong
Kong.
The two proposals are now being reviewed by The State
Council and the state-owned Assets Supervision and Administration
Commission (SASAC) - the ultimate controlling shareholders
of China's telecom's groups. The plans call for the mergers
at the parent level of the telcos.
The state is anxious to avoid overlapping investments
for 3G. Because this involves new technology, the upfront
technology investments for the networks will be large.
Adding to the worries, all are anxious to tap into international
capital markets before the Chinese market is opened to
foreign competition. From the government's viewpoint,
having fewer companies making large capital investments
would contribute to their balance sheet health. However,
the move is also opposed by some in the government who
feel that increased competition will be healthier, and
will give customers a wider range of options.
China Netcom, the smallest of the telcos, will stand
to benefit most from the proposed merger plans.
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