China Telecom, China Unicom in strategic agreement meant to increase share of market

By Chen Qingqing Source:Global Times Published: 2016-1-13 20:58:01

Two leading telecom operators in China signed a strategic partnership on Wednesday that will improve their networks' compatibility. 

The move aims to compete for larger market share, analysts said.

China Unicom and China Telecom agreed to pool their resources and improve the quality of their services, according to an announcement posted Wednesday on both companies' websites.

The two carriers will work together in five areas: expanding network coverage; developing 6-model phones; improving network service quality; encouraging innovative business models and pursuing cooperation with international carriers, the announcement noted.

A 6-model phone supports the GSM, WCDMA, TD-SCDMA, TD-LTE, FDD-LTE and CDMA standards. Some of those standards are international and some are specific to China.

Analysts said these moves are positive, especially after Chang Xiaobing, the former chief of China Telecom, was put under investigation for suspected serious disciplinary offenses.

While China Telecom has been working on those goals for a while, "the official announcement gives shareholders a clear understanding of the firm's corporate strategies for 2016," Fu Liang, Beijing-based IT analyst, told the Global Times.

He noted that there has been market speculation about the two carriers cooperating in network sharing and pushing forward 6-model phones, aiming at competing with China Mobile, another major carrier in the country.

"As China Mobile now has leadership in fourth-generation [4G] networks, China Unicom and China Telecom have to form an alliance to gain competitiveness," Xiang Ligang, another telecom industry expert, told the Global Times on Wednesday.

As of the end of June 2015, the number of 4G customers of China Mobile reached 190 million, according to the company's interim report of 2015.

China Mobile is planning to build about 1.3 million 4G base stations in 2016, up about 30 percent on a year-on-year basis, domestic news portal reported in December 2015. However, the total number of 4G stations of China Unicom and China Telecom is expected to reach just 500,000 in 2016, which would leave them far behind, the media report noted.

China Telecom has been actively encouraging the 6-model phone, while the other two carriers do not think supporting the CDMA network is necessary, noted Xiang. "That may become a major challenge in the cooperation between China Telecom and China Unicom," he said.

The strategic partnership has also fueled speculation about a potential merger, "which is quite unlikely," Fu noted. If State-owned enterprises start talking about mergers or acquisitions, the State-owned Assets Supervision and Administration Commission will get involved, he said.

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