China Mobile Acquires China Tietong, Kicks Off Telecom Industry Restructure

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Includes: CHA, CHL, CHU, CN-OLD
by: Interfax-China

China Mobile Communications Corp. (NYSE:CHL), China's largest mobile operator, announced Friday that it will acquire China Tietong, giving credence to a report earlier in the day that the restructure of China's telecom industry has begun.

"China Tietong will be merged into China Mobile and become its wholly-owned subsidiary. It will retain relatively independent operation for the time being," China Mobile said in an announcement.

CCTime.com, a telecom news portal founded by Xiang Ligang, the former editor-in-chief of Communications Weekly, reported Friday that a telecom restructuring plan was "announced" at 10:00 this morning. However, at the time of writing, there has been no official confirmation of the announcement.

In addition to China Mobile's acquisition of China Tietong, China Unicom (NYSE:CHU) will sell its CDMA network to China Telecom (NYSE:CHA) and China Unicom's GSM assets will merge with China Netcom (CN-OLD) to become a "new China Unicom," according to the report.

"The announcement of the telecom restructuring plan marks the entering of a new era for China's telecom industry. This will bring about great changes to the landscape of telecom operators and equipment manufacturers," Xiang wrote in his blog.

"I heard from insiders that the rumor is true. However, the public should rely on the official announcement by the State-owned Assets Supervision and Administration Commission of the State Council [SASAC] instead of news reports citing unnamed sources," a senior researcher from the SASAC told Interfax when asked about the CCTime report.

According to China Mobile's announcement, Zhang Chunjian, the president of China Netcom, will become China Mobile's secretary of the party leadership group and vice president as part of a leadership reshuffle.

Wang Jianzhou will remain president of China Mobile and become the company's deputy secretary of the party leadership group. The current China Mobile vice presidents will remain in their positions.

Zhao Jibin, China Tietong's chairman, Zhang Xiaotie, China Netcom's vice president and Li Zhengmao, China Unicom's vice president, will also become China Mobile's vice presidents and members of the party leadership group.

The changes will not affect China Mobile Limited, the Hong Kong-listed arm of China Mobile, the announcement said.

According to the CCTime report, Wang Xiaochu, president of China Telecom, and Shangbing, president of China Unicom, will form the leadership of China Telecom. Chang Xiaobing, the chairman of China Unicom, will lead a preparation group for the "new China Unicom."

Rumors about telecom restructuring have been circulating in China for almost four years. A previous rumor this month said that the restructure plan would be announced on May 17, the World Telecommunication and Information Society Day.

By 1:03 p.m. Beijing-time (the time of writing), China Unicom's A-share price surged 5.08 percent to RMB 9.73 ($1.4) per share.