Lead­er­ship reshuf­fle at China's three big­gest tele­com groups

The Pak Banker - - COMPANIES/BOSS -

All three of China's largest tele­coms op­er­a­tors got new lead­ers on Mon­day in a top-level reshuf­fle that made clear the tight links be­tween the state-run com­pa­nies.

China Tele­com and China Uni­com, the sec­ond and third-largest Chi­nese tele­coms com­pa­nies, agreed to swap chair­men, while a se­nior reg­u­la­tor be­came chair­man of China Mo­bile, the world's largest tele­coms group by num­ber of sub­scribers. Such clubby re­la­tion­ships be­tween three com­peti­tors in the sec­tor are nor­mal in China. The state's mix-nmatch ap­proach is ex­pected to con­tinue later this year with a much dis­cussed re­form plan that will see the as­sets of the com­pa­nies com­bined in new ways.

Chang Xiaob­ing, for­mer chair­man of China Uni­com, be­came chair­man of China Tele­com while Wang Xiaochu, de­part­ing chair­man of China Tele­com, was ap­pointed chair­man of China Uni­com. China Mo­bile an­nounced on Mon­day that Shang Bing, vice min­is­ter of China's com­mu­ni­ca­tions reg­u­la­tor, would suc­ceed Xi Guo­hua, the cur­rent chair­man, be­com­ing the third con­sec­u­tive vice min­is­ter to run the $243bn com­pany with more than 800m sub­scribers.

"We see this move as broadly neu­tral for China Mo­bile and ex­pect the com­pany to con­tinue to ex­e­cute their cur­rent strat­egy," said Chris Lane of San­ford Bern­stein in Hong Kong. He added that Mr Wang's lead­er­ship at China Tele­com had been broadly pos­i­tive, which boded well for his new com­pany. "He will re­vamp Uni­com's ex­ist­ing strat­egy and help re­store its com­pet­i­tive­ness."

How­ever, Mr Lane was less en­thu­si­as­tic about the reshuf­fle's im­pli­ca­tions for China Tele­com. "We are less con­vinced Mr Chang's ap­point­ment to China Tele­com is good news. He has presided over a sig­nif­i­cant weak­en­ing in Uni­com's com­pet­i­tive po­si­tion over the past year, much of which we put down to poor strat­egy," he said.

Uni­com's tele­com ser­vice rev­enue growth rate was lower than the in­dus­try av­er­age for the first time since 2008 in the first half of 2015 due to ris­ing com­pe­ti­tion from China Mo­bile's 4G ser­vice, ac­cord­ing to Leping Huang of No­mura. "We hope Mr Wang can turn this trend around," he said. Over the next few months, in­dus­try ex­perts ex­pect re­forms to the sec­tor, start­ing with the cre­ation of a China Tower Com­pany, which will take over the three op­er­a­tors' mo­bile phone masts in an ef­fort to boost ef­fi­ciency and re­duce du­pli­ca­tion. An­a­lysts said the fi­nal trans­fer of as­sets, and re­lease of the fi­nan­cial de­tails, is likely to be com­pleted in Septem­ber or Oc­to­ber.

The Tower Com­pany will be 40 per cent owned by China Mo­bile, and 30 per cent each by China Tele­com and China Uni­com. Bloomberg News re­ported in July that the Tower Com­pany may sell as much as a 20 per cent stage in a pri­vate place­ment, rais­ing up to Rm­b60bn ($9.36bn).

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