China Mobile to Benefit from Telecom Sector Re-org

All the big China telecom players - China Mobile (CHL), China Netcom (CN), China Telecom (CHA) and China Unicom (CHU) - are majority owned by the state. In the widely anticipated re-org plan, the government will try to create more competition in the wireless arena (right now CHL is much bigger than CHU), and save the fixed line operators, such as CHA and CN, which are losing landline subscription to mobile phones. China Unicom, currently the smaller rival of China Mobile, will sell its CDMA network to China Telecom, and CHU (with its GSM network) will merge with China Netcom.

This means China Mobile will have a new competitor, China Telecom (which ironically, is its former parent), and a more focused/strengthened older rival (Unicom). But the math is not the deciding factor here.

First, it may not easy to divide up the two networks of China Unicom. More importantly, as we know, a frog is still a frog after you kiss it. China Unicom will still be the underdog after the split. As to China Telecom, it will take time for them to move from fixed line to mobile world (no offense to the hard working people at CHU and CHA).

Meanwhile, China Mobile is signing up new subscribers (2.5G) from rural areas and offering data service or second lines to users in cities, as shown in this Chinese news (source: 21cbh) and the company’s English website.

I will talk about the huge hype around 3G and the deployment delay (related to reorg) in China later on.

Disclosure: Author has a long position in CHL