Shakeup as China splits phones into four


China touts improved service with the restructuring of its telecom industry

By Amabelle Layug

HONG KONG, China -- China will grant two new cell-phone licenses, Beijing has confirmed, and let its existing two cell phone companies offer land-line calls.

The end result will be that China will have four phone companies, all of them offering both mobile and fixed-line service.

Separately, one of the mainland's phone companies, China Unicom, unveiled its new CDMA cell-phone network.

At the moment, China has only two cell-phone providers -- China Mobile and China Unicom. Unicom is the only company offering both fixed-line and mobile calls in China at the moment.

Land-line companies go mobile

The country is also splitting its dominant fixed-line company, China Telecom, into two companies -- China Telecom and China Netcom.

The plan is to give all four telecoms the chance to sell a full range of services, including fixed-line calls, broadband access, mobile service and other features.

The move, first reported in state-run China Daily newspaper, is part of an effort to overhaul the phone industry, boosting competition and giving consumers better service.

China Netcom will be officially launched next month. But it will take at least two years until it and China Telecom start mobile services, according to Minister of Information Industry Wu Jichuan.

The two are expected to be granted mobile licenses in the near future.

Wu said the plan would make fully competitive companies that would provide customers high-quality prices at reasonable prices.

Expanding service

China is the world's largest mobile market, with about 140 million subscribers. It surpassed the United States last year, according to figures from the Chinese mobile companies.

China Mobile is the country's largest cellular carrier. Should the plan push through, China Mobile would expand its operations to include a fixed-line service.

But China Mobile said it will be "cautious" about entering the full-service fixed-line business.

"Over the years, the development strategy of the company has been to focus on mobile communications and related business," China Mobile said in a statement.

New venture

Though China's new licenses were expected, the prospect of greater competition has sent the stocks of China Mobile and China Unicom reeling.

Both are listed in Hong Kong. China Mobile fell 7.8 percent on Wednesday, closing at HK$25.45.

China Unicom fell 4.05 percent to HK$8.30.

As competition begins to heat up, China Unicom launched on Tuesday its CDMA mobile-phone network.

CDMA, which stands for code-division multiple access network, can support greater bandwidth than existing networks based on the GSM, or 'global system for mobile communications,' standard.

CDMA is widely used in the United States, while Europe and most of Asia, including most of China, uses GSM.

China Unicom is selling CDMA to its wealthier customers, particularly businesses.

But analysts fear the new venture could be too risky for China Unicom. The first phase alone cost $2.8 billion.

China Unicom has about 35 million GSM subscribers, and the CDMA system might cannibalize that market.