How should this impact investor thinking?
Key points from the FT piece:
- Chinese officials no longer see the need for four state-controlled telecom operators.
- Concern about over-competition has caused the government to delay introduction of advanced 3G mobile services.
- While officials see the introduction of 3G services as vital, they fear that granting licenses to all four operators would prompt huge spending on multiple national networks for something of still unproven commercial merit.
- The operators should be consolidated.
- The logical loser: China Unicom. Why? It runs two networks based on completely different standards, GSM and CDMA. Rumors suggest that these networks will be merged and divided between China Telecom (ticker: CHA) and China Netcom (ticker: CN).
- Why this might not happen? Merging China Unicom's operations into its rivals would weaken competition the government has worked so hard to encourage in recent years.
Quick thought: China will have an estimated 760 million telephone subscribers by the end of 2005. The promise of large numbers of mobile subscribers and the arrival of 3G seem to give China Mobile (ticker: CHL) and China Unicom the greatest revenue growth potential of the group of four China telecom stocks, due to their focus on wireless. And with rumors of China Unicom's demise continuing to persist, China Mobile may become the only pure-play China wireless carrier.