China Unicom and China Telecom alliance not seen as threat to China Mobile

A strategic alliance between China Unicom and China Telecom is not expected to be enough for the two companies to close the competitive gap with China Mobile, the mainland’s top wireless network operator.

In a joint announcement last Wednesday, Unicom and China Telecom agreed to an ambitious cooperation deal that aims to promote structural reforms in China’s telecommunications industry and help advance the government’s “Internet Plus” strategy for broader online access nationwide.

Chris Lane, a senior analyst at Bernstein Research, said in a report that the deal was a welcome development for Unicom and China Telecom to help improve their market position in the world’s second-largest economy.

“We see any adverse impact on China Mobile as being quite minor ... we continue to believe China Mobile’s absolute network advantage – and by virtue of this, its hold on premium customers – will remain for the foreseeable future,” Lane said. “We see China Mobile benefiting financially from its strong 4G subscriber momentum in 2016, while China Telecom and Unicom suffer from significant network expansion costs and poor subscriber momentum.”

China Mobile, the world’s largest wireless network operator by subscribers, is targeting 500 million 4G subscribers by the end of this year.

As of November 30, China Mobile had 287.32 million 4G users out of its total subscriber base of 825.19 billion.