A long-awaited restructuring of the Chinese landscape is now falling into place, and could represent a solid uptick in spending in Telecom, forming full-range service providers in one of the fastest growing markets globally.
- Fixed line operator China Telecom will acquire the CDMA wireless network from China Unicom as well as small operator China Satellite Communications
- The GSM wireless network of China Unicom will merge with fixed line service provider China Netcom.
- Leading mobile operator China Mobile will acquire fixed line provider China Tietong
This would leave China with 3 competitors with similar assets, and should provide for an environment where the companies will be able to afford to spend on next generation networks, especially at a time when there will be growing convergence between wireless and wireline strategies. The mergers, which could take a half year or so to put into motion, could also the award of 3G wireless licenses, a long awaited event for major equipment makers. This should also help to provide some direction to wireless networks in China, where the homegrown TD-SCDMA standard is battling emerging 3G standards for a place in these networks. While U.S. carriers appear to be converging towards Long-Term Evolution (LTE) as their next gen wireless standards, the same cannot be said for Chinese operators – though these M&A activities should help in these efforts to build consensus to some degree.
The bottom line is that this announcement in China is really an incremental positive for global network service providers as this could trigger additional capex as these companies plan their converged IP networks of tomorrow. A positive for Chinese companies like Huawei and ZTE Telecom, for wireless specialists like Ericsson and Alcatel-Lucent, and router specialist Cisco.
