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Telecoms revamp tipped to follow shake-up

China Mobile

This week's creation of the mainland's telecommunications super ministry is unlikely to derail the long-awaited restructuring of the industry giants, with analysts saying the revamp is imminent.

The State Council announced on Monday the formation of a new Ministry of Industry and Information as part of Beijing's wider shake-up of top government departments.

It integrates the relevant functions of the National Development and Reform Committee (NDRC), the Commission of Science, Technology and Industry for National Defense, Ministry of Information Industry and the State Council Information Office. It will also take over the State Tobacco Monopoly Bureau.

Wang Xudong, the minister of the information industry, is tipped to become the new ministry's party secretary, while Li Yizhong, minister of the State Administration of Work Safety, is expected to head the ministry.

'The telecommunications industry policy is expected to remain consistent' following the creation of the new ministry and the appointments, said Marvin Lo, an analyst at Daiwa Institute of Research.

The restructuring plan, which may be announced as early as this month, is expected to transfer some mobile phone assets to the big fixed-line operators, which have lost customers to cheap cellular services.

Under the proposal, fixed-line operator China Telecom could acquire China Unicom's CDMA mobile business while Unicom's GSM mobile business could be merged with China Netcom Group Corp, another fixed-line company. China Mobile would acquire China Tietong, the national railway's fixed-line network.

Mobile licences for China Telecom and Netcom should help them catch up with the growth of China Mobile, the nation's largest operator.

'The restructuring plan could be announced shortly, as we have learnt that all the operators are preparing for the new business,' said Fang Meiqin, an analyst at BDA, a telecommunications research house.

'For example, China Telecom has set up a team for CDMA business. The new ministry should not affect the restructuring. The restructuring has been discussed within the government for a long time.'

Market watchers said the new ministry should be able to develop homegrown telecommunication standards, allowing China to become a major global industry player.

'The powers of the new ministry have been expanded and this should help China establish a homegrown value chain for the communications sector,' said Kelvin Ho, an industry analyst at Nomura International.

Beijing is pulling out all the stops to establish TD-SCDMA, a homegrown 3G mobile technology standard. TD-SCDMA services in 10 cities are scheduled to be launched during the Beijing Olympics as a showcase of Chinese technology.

'The new ministry should have the capability to handle new projects, allowing China to avoid relying on low-end, low-margin products,' said Mr Ho. He added that the integration of various government departments should provide the new ministry with clear responsibilities on the development of the information industry.

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