China is preparing to reshuffle the top management at its three telcos, it emerged on Friday, but there are conflicting rumours about what changes will take place.
Sources cited by Bloomberg and local news outlet Caijing claim that China Mobile chairman Xi Guohua is set to retire and will be succeeded by Shang Bing, who currently serves as a vice minister at the Ministry of Industry and Information Technology (MIIT). The sources said similarly major changes are afoot at China Telecom and China Unicom.
How ever, according to Caijing, there are also rumours that former China Mobile CEO and current China Telecom chairman Wang Xiaochu may return to his previous company and that Shang Bing will take over at China Telecom. China Unicom’s leadership will remain unchanged.
It is not entirely clear what the Chinese government hopes to achieve by making its top telco executives play musical chairs. A more radical approach would be to look for candidates from adjacent industries who could bring a fresh perspective on how the industry should move forward.
The last major restructure of China’s telecom market took place in May 2008. It brought about the end of pure-play fixed and mobile operators and created three integrated services providers instead.
China Mobile took over fixed-line operator China Tietong, and China Telecom – which at the time was the country’s largest fixed player – absorbed China Unicom’s CDMA network. China Netcom, then the country’s smallest fixed-line operator, merged with China Unicom’s GSM business.
The move was aimed at fostering more competition, particularly in the mobile market, which at the time was dominated by China Mobile.
Not much has changed on that score (see chart).
China Mobile still enjoys a comfortable lead, particularly in the 4G market, where it has notched up more than 200 million subscribers. By comparison, China Telecom has 29 million, while China Unicom still does not disclose how many 4G subscribers it has.
However, in the age of mobile data, new competitors have emerged that are threatening the status quo.
In its results presentatio n on Thursday, China Mobile warned of intensifying rivalry with other telcos, but also over-the-top (OTT) service providers and kit makers. Its first half service revenue edged up 0.5% on last year to 299.5 billion yuan (€41.6 billion).
Similarly this week, China Telecom on Wednesday reported first half service revenue of CNY147 billion (€20.4 billion), flat on last year, while on Friday, China Unicom reported a 5.3% fall in service revenue to CNY144.7 billion.
Admittedly the sluggish performance has more to do with last year’s VAT reforms than the unstoppable march of the OTTs. The new tax regime applied an 11% tax on basic telco services and a 6% tax on value-added services, replacing the 3% business tax the telcos previously paid.
Nonetheless, China’s three telcos are proceeding with caution.
China Mobile’s Guohua warned that "changes of customer demand" will require the company to alter its price plans, which will "bring considerable impacts on our development."
China Telecom faces "various challenges", including but not limited to "intensifying competition within and across the industries," according to the telco.
Meanwhile, China Unicom chairman Chang Xiaobing is more bullish, talking up the operator’s plan to create differentiated services "so as to ensure the company’s continuous and rapid development."
On that note, and given that China’s 2008 telco restructuring created integrated fixed and mobile players, perhaps the next one will marry telcos and TV?
