China finally unveils telecom industry restructuring plan

China has finally unveiled key aspects of its restructuring plan for the domestic telecommunications industry. The Red Cat Journal highlighted the importance of the plan in a previous article on China’s telecom industry. China has trailed other countries in rolling out 3G mobile phone services. As the restructuring plan is implemented, China will issue three licenses for 3G services and domestic telecom companies can finally start to roll out commercial 3G mobile phone services. The new licenses are not likely to be issued until consolidation of the industry has progressed further. China’s telecom restructuring plan calls for the six current telecommunications companies to be merged into three. It is likely that the three 3G licensees will use three different 3G technology standards: WCDMA, CDMA 2000 and China’s own TD-SCDMA.

The three survivors are likely to look as follows after the restructuring:

  • China Mobile: The company has already announced a takeover of China Tietong, a fixed-line operator which uses a railway-based telecom network. The company should base it 3G services on the TD-SCDMA standard.
  • China Unicom: The company will combine its GSM mobile phone services with China Netcom’s fixed-line services. It is likely to base its 3G services on the WCDMA standard.
  • China Telecom. The company will combine its current fixed-line service with China Unicom’s CDMA mobile phone services. It will also pick up the telecom services of China Satcom, a satellite communications company. It is likely that the company will base its 3G services on the CDMA 2000 standard.

Although there remain many uncertainties, it does appear clear that the shakeout spells more competition for China Mobile, China’s leading mobile telecom services operator. As a result, the company’s shares fell 8% today during Hong Kong trading. The company has been testing TD-SCDMA services and the new technology has had some teething problems. If problems continue into commercial implementation, that could spell more trouble for China Mobile.