China plans telecom restructuring, clears way for 3G

By Sumner Lemon, IDG News Service |  Mobile & Wireless, 3g, China

China announced a restructuring plan for the country's fixed-line and mobile operators on Saturday, a final step towards the long-awaited release of 3G (third-generation) mobile licenses.

The plan, long a focus of discussion among Chinese government organizations, will merge or split the operations of Chinese carriers, creating three new operators that will have both mobile and fixed-line services. At present, Chinese fixed-line operators -- which are split along geographical lines -- are not permitted to offer mobile services, while mobile operators may not offer fixed-line services.

When the restructuring is completed, China will issue 3G licenses, the government said in a statement (in Chinese) that was signed by the newly formed Ministry of Industry and Information, the National Development and Reform Commission, and the Ministry of Finance.

The 3G licenses may even be issued before the restructuring process is completed, said Bryan Wang, Springboard Research's Greater China country manager and director of connectivity research. "Optimistically, it could happen before end of this year," he said.

By restructuring the operators into companies that offer both types of services, the Chinese government hopes to enhance the competitiveness of local operators and clear the way for 3G licenses to be released. China has one of the world's biggest mobile markets, but will be one of the last to roll out commercial 3G services.

Under the restructuring plan, fixed-line carrier China Telecommunications (China Telecom) will acquire the CDMA (Code Division Multiple Access) mobile network from China United Telecommunications (China Unicom). China Telecom will also acquire China Satcom, which offers satellite-based communications services.

China Unicom will retain its GSM (Global System for Mobile Communication) network and merge with fixed-line operator China Network Communications (China Netcom).

China Mobile Communications, China's largest mobile operator, will merge with China Tietong Telecommunication, which operates a national fixed-line network.

The most difficult part of the restructuring process will involve splitting out China Unicom's CDMA network and transferring it to China Telecom. "China Telecom has already set up a team for CDMA, but obviously that's a smaller team conducting some studies to understand Unicom's network," Wang said.

Growing that team will be a challenge, as some important China Unicom executives may not join China Telecom. "Unicom plans to keep all the key guys for its GSM business," he said.

The statement that announced the plan did not offer a deadline for when the restructuring will be completed, but a report by the official Xinhua News Agency estimated the process could take 12 months to 18 months.

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