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Christine Chan

Jasper Becker

Beijing yesterday forced the People's Liberation Army to divest itself of its commercial cellular telephone companies as part of its effort to force the military to sever business links.

All of the PLA's 'mobile network businesses will be transferred from the military to China Unicom Corp', senior Ministry of Information (MII) official Jiang Shaobing said yesterday.

He did not specify when the handover would be completed but the transfer will strengthen China Unicom, the country's No 2 telecom.

Although small, the military networks provided competition to the weak rival of state-run giant China Telecom.

Among others, the PLA has a 50 per cent stake in Great Wall Communications, a three-year-old mobile-phone joint venture which operates trial runs on CDMA (code division multiple access) phone networks in Beijing, Shanghai, Xian and Guangzhou.

The remaining stake in Great Wall is held by the MII.

The instruction to the PLA appears to be an action associated with President Jiang Zemin's 1998 order to the PLA to give up their sprawling business empire.

Analysts said the latest move also formed part of a concerted attempt by Beijing to groom China Unicom to become a credible competitor to dominant China Mobile Telecom (Group).

Last year, it gave China Unicom Corp the country's biggest paging company - China Guoxin Paging - free of charge.

Shares of China Unicom, the Hong Kong-listed arm of China Unicom Corp, rose three per cent to break the HK$20 mark to close at HK$20.50 on the back of news of yet more government support to the company. A 12-month target of HK$25 issued by its listing sponsor Morgan Stanley Dean Witter also helped.

However, Hong Kong-based analysts said the SAR-listed company was not a direct beneficiary of the transfer and they were unclear about the quality of Great Wall's second-generation CDMA networks.

Great Wall does not have a licence to operate mobile phones in the mainland. China Mobile and China Unicom are the only two licensed operators.

While China Unicom, which operates a GSM system, could acquire CDMA networks from its parent, analysts have questioned whether Great Wall's 2G networks would be compatible with the Unicom group's third-generation development plans.

China Unicom Corp has announced a rethink of its mobile-phone strategy, giving up existing second-generation networks for third-generation standards.

By June, listed China Unicom's subscriber base had leapt to 8.2 million from the 4.2 million at the end of last year.

The MII reported 12.7 million new mobile phone subscribers in the first half of the year, not many less than the 14.9 million additional fixed-line subscribers.

The mainland now has 124 million fixed line subscribers and 56 million mobile phone users and some analysts expect that by 2004, mobile phones will outnumber fixed line subscribers.

The ministry also reported there are now 5.5 million data and multimedia communicators and the Internet user base has grown to more than 10 million.

It also said there are now more than two million computers in the mainland and it reported big increases in the electronic and communications hardware manufacturing sector.

Mobile phone production increased 143 per cent to 18.86 million sets in the first half.



PLA told to axe mobiles