The outline of the long-awaited telecom industry restructuring plan has been announced on Saturday 24 May, 2008. The eagerly awaited restructuring goes far to create three major full service operators out of the existing six operators.

In summary:

  • China Mobile to acquire Tietong (China Railcom)
  • China Telecom to acquire CDMA business of China Unicom and the basic telecom services of China Satcom.
  • China Unicom's GSM business to merge with China Netcom

According to a Notice on the Enhancement of Telecom System Reform jointly issued by the Ministry of Industry and Information, the State Commission of Development and Reform and the Ministry of Finance (the “Notice”), it is “encouraged” that China Mobile takes over the small fixed line carrier, China Railway Communication (also known as “Tietong”), China Netcom be merged with China Unicom to form new China Unicom Group, China Satcom (which is also known as “Weitong” and provides satellite based communication services) be absorbed into China Telecom and China Telecom acquires the CDMA (Code Division Multiple Access) mobile business (including network assets and customers) from China Unicom.

Recent years have seen the slow down in fixed line as more new customers choose mobile services. The restructuring plan has linked up China’s fast-growing mobile carriers with fixed line carriers. Following the planned restructuring, China’s market will be dominated by three key players (i.e. China Mobile, China Unicom and China Telecom) that will operate both mobile and fixed line services. Currently, fixed line carriers may not provide mobile services while mobile carriers may not operate fixed line services.

There has also been a senior management reshuffle among the operators to implement the restructuring arrangements.

According to the Notice, the restructuring will be linked up with the issuance of 3G licences and three licences will be issued following the planned restructuring. The details of the 3G licences to be issued have not yet been announced.

The Notice has requested the relevant operators to implement the restructuring plan in accordance with the “spirit” of the Notice without setting out a timetable for the restructuring. However, a report by the Xinhua News Agency estimates that the process may take 12 to 18 months.

China Telecom and China Netcom have suspended their H-shares and China Unicom has suspended its H-shares and its Shanghai A-shares. Many analysts are predicting that the main loser will be China Mobile.