China's Telecom Shake-Up Advances With Mergers

HONG KONG, June 2 -- China pressed ahead with a restructuring of its telecommunications market Monday as mobile-phone company China Unicom announced plans to take over a fixed-line provider and sell off a mobile business.

The country's No. 2 mobile operator said it would acquire China Netcom Group in a share swap valuing the fixed-line operator at $23.8 billion. That represents a 3 percent premium over China Netcom's last closing share price.

Separately, China Unicom and its parent said they would sell the CDMA (code division multiple access) mobile network and accompanying business to China Telecom and its parent for $15.86 billion. China Telecom is the country's biggest fixed-line operator.

The moves were expected as part of a government-mandated shake-up of China's telecommunications sector unveiled late last month. That plan called for the country's six telecom companies to combine into three groups in a bid to create a more competitive industry and prevent a dominant operator from monopolizing the market.

The deals could help China Unicom and China Telecom compete with the country's cellphone heavyweight, China Mobile, the world's largest mobile provider by subscribers. China Telecom could expand its new mobile business with its current fixed-line customers; China Unicom could increase its current mobile business with the new fixed-line subscribers.

"China Mobile, as everyone has talked about, would have more competition," said Jackson Wong, investment manager at Tanrich Securities in Hong Kong.

Still, even China Unicom's chairman and chief executive, Chang Xiaobing, suggested that a close rivalry was far off.

Asked at a news conference when his company might surpass China Mobile, Chang grinned. "It's hard to say when the new company will become the largest mobile operator in China," he told reporters. "Frankly, I still believe there is a significant gap between the new company and China Mobile."