Chinese regulators are studying a new plan to consolidate the nation's telecoms operators, industry sources revealed yesterday.

The new proposal will see China Unicom, which operates two different mobile networks and a fixed-line network, merge its GSM cellular network with fixed-line carrier China Netcom.

And bigger fixed-line carrier China Telecom will buy Unicom's underused CDMA network, sources said.

That is markedly different from the previously discussed plan under which China Telecom was due to get the GSM network, while China Netcom was to be awarded the CDMA network.

Under the new plan, China Unicom's fixed-line networks will also be split geographically to complement China Telecom and China Netcom's fixed-line networks.

China Telecom, which mainly operates fixed-line networks in southern China, will take over Unicom's fixed-line networks in northern China.

And the new China Unicom, after the merger with China Netcom, will retain its fixed-line networks in South China.

That would help China Telecom and China Netcom get truly nationwide fixed-line networks, sources said.

Former fixed-line behemoth China Telecom was divided into two firms in 2002: China Telecom which operates in southern China and China Netcom in northern China.

The China Unicom brand name will remain after the restructuring, while the name of China Netcom will disappear, sources said.

Following the sweeping reshuffle, both China Unicom and China Telecom are expected to have annual revenues of roughly 170 billion yuan (US$20.48 billion), compared to China Mobile's annual revenue of 192.4 billion yuan (US$23.18 billion) in 2004.

"That would basically put all the three major operators on an equal footing," an industry source said.

Regulators have yet to give the final go-ahead to the new plan, which may be subject to some minor alterations, sources said.

But this plan is the most likely to be adopted among the several on the regulators' table, they said.

Under the new plan, China Unicom Chairman Chang Xiaobing is likely to head the new China Unicom.

China Netcom General Manager Zhang Chunjiang may leave the telecoms industry and become a provincial leader. China Netcom President Edward Tian will mainly focus on overseeing Netcom's joint venture with Hong Kong's PCCW Ltd, sources said.

China Netcom paid US$1 billion for a 20 per cent stake in PCCW and the two firms said they would establish a joint venture on the Chinese mainland.

Tian was appointed vice-chairman of PCCW recently.

Reshuffle unavoidable

Rumours about an industry-wide reshuffle have been rife since January 28, when the State-owned Assets Supervision and Administration Commission (SASAC) said the government was studying a reshuffle of the industry but denied there were any definite plans.

Many industry observers believe a reshuffle is unavoidable, particularly in the run-up to the licensing of 3G (third generation) mobile communications services in China.

It has become increasingly difficult for China Unicom to operate two different networks, with the firm's business suffering as a result.

Even Unicom's Chang acknowledged last month that a reshuffle would benefit the entire industry.

China Telecom Chairman Wang Xiaochu has, on many occasions, even after the SASAC's denial of the reshuffle plan, expressed a "personal view" about China Telecom's proposal to buy one of Unicom's cellular networks.

And Wang said he believed China Telecom would eventually win regulatory approval.

China Mobile Chairman Wang Jianzhou was also cited as saying that China Mobile submitted a proposal to regulators about the reshuffle of the telecoms industry.

China Unicom has been viewed as the icon of the breaking of the monopoly in China's telecoms sector. That may explain why regulators are now inclined to keep the Unicom brand, insiders said.

(China Daily April 6, 2005)