Leadership reshuffle at China's three biggest telecom groups
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).