Regulation Concerns Dog Chinese Telecom Investors
By Carlo Longino, Tue Nov 16 23:45:00 GMT 2004

In addition to uncertainty over the Chinese government's plans for 3G, investors in the country's telecom operators are worried at potential changes it might force on the industry there.

The mobile industry's been waiting for the Chinese Ministry of Information Industry to award the country's 3G licenses, and the recent disappointing test results of the country's homegrown TD-SCDMA standard called the timetable into further question. But the worry now is that the government may merge or break up some of the country's fixed and mobile operators. Though many of them have units listed on foreign stock exchanges, the Chinese government owns majority stakes in all of them, and the worries have been fuelled by a number of recent personnel changes Beijing has instigated, as well as a corruption probe.

The Wall Street Journal spells out a few possible scenarios: one has the holding companies of the top four operators (China Mobile, China Unicom, China Telecom and China Netcom) being rolled into two. Another has one of the companies being shut down and its mobile network assets divvied up among the others -- analysts say the most likely being China Unicom, which they say is having a hard time maintaining both CDMA and GSM networks.

But what's driving this -- government concern over high 3G spending -- will raise some eyebrows in the mobile network gear business, which has been looking to China as its next pot of gold. Since the plans to save money by using the royalty-free TD-SCDMA seem to be on hold, the government may see where else it can cut corners, particularly by reducing the number of 3G networks to be built from three to two. This then has the knock-on effect of calling into question -- again -- which standards it will back, leaving foreign vendors in the lurch for a bit longer.