The Chinese Telecoms Three-Step

Posted on May 26, 2008
Filed Under Apparatchiks, China Business, China Internet, Mobile, Wireless Networks |

The personnel adjustment regarding China’s telecom restructuring has been published with Wang Jianzhou appointed to work as president and CEO of China Mobile (CHL); Zhang Chunjiang as first vice president and party secretary of China Mobile; Wang Xiaochu as president and CEO of China Telecom (CHA); Shang Bing as party secretary of China Telecom; Chang Xiaobing as team leader for the preparatory team of the new China Unicom (CHU); and Zuo Xunsheng as deputy team leader of the preparatory team of the New China Unicom.

Meanwhile, Zhao Jibin, president of China Tietong; Li Zhengmao, vice president of China Unicom; and Zhao Xiaotie, vice president of China Unicom, will go to work at China Mobile. Yang Xiaowei, vice president of China Unicom, and Miao Jianhua, leader of the Discipline Inspection Team of China Unicom, will be transferred to work with China Telecom.

According to the restructuring plan, the existing six Chinese operators will be changed into the pattern of “3+1â€³, with China Unicom’s CDMA business incorporated into China Telecom to form a new China Telecom company, China Unicom’s GSM network included into China Netcom for forming a new China Unicom, China Tietong incorporated into China Mobile to form a new China Mobile company, and China Satcom will remain unchanged.

After the restructuring, China Mobile’s market competitiveness will probably be weakened and China Telecom will be the biggest winner in the market with a whole-service license.

The broad strokes of the plan have been long telegraphed, so there’s little in the way of surprises here. The personnel shuffle seems a little odd, especially as people are getting appointed as “party secretaries”. Perhaps this is common in state-owned enterprises, but it has an anachronistic ring to it. Not to mention begging the question of just how powerful party secretaries are.

China Mobile has been hammered in the Hong Kong bourse over this, as a revitalized China Telecom is expected to provide some pretty sharp competition. But as this is going to take months to sort out I really don’t see China Mobile under any real competitive pressure anytime soon.

The re-shuffle raises a few interesting questions. First, how aggressive will China Mobile be in consumer broadband? They’re the first ones out with 3G, and they’re already upgrading the hardware for HPDSA, so it’s just a question of pushing the consumer hardware and rolling out TD-SCDMA in some more key markets in China.

Second, when do China Telecom and China Unicom get their 3G licenses? Reports say when the “overhaul” is complete. That’s great news for China Mobile as they have the summer and the Olympics to relentlessly promote their 3G offering. “Overhauling” could take even longer - China Mobile can’t be too worried.

Third, what about other 3G technologies? With China Telecom getting China Unicom’s CDMA network and China Unicom stuck with its GSM network, new technology is definitely on the menu. The question is who (Telecom and Unicom) will get what (CDMA2000 or WCDMA). TD-SCDMA is the designated national champion, so it’s tough to think that the success of other 3G technologies would be welcome over at the Ministry of Information Industries (MII).

Lastly, what does this mean for WiMAX? Mobiles are all well and good and the 3G infrastructure is capable of supporting device connectivity at broadband bandwidth, but there are a lot of planned wireless municipal networks out there, most of which seem to incorporate WiMAX to one degree or another. All of the companies have some degree of experience with the technology. It’ll be interesting to see how it gets bolted on.

Oh, and network equipment makers such as ZTE, Datang, Ericsson, etc., etc. are all salivating bullets over this.