China Telecom, world’s largest telecom operator in terms of subscribers, in process of taking over China Unicom ’s CDMA network, has issued tenders for a network expansion. The key aim of the contract is to increase coverage areas rather than boost the quality of service in areas already under CDMA coverage. he initial contracts are expected to be awarded within a few weeks. According to the industry sources, the contracts are expected to be worth around US$4 billion.
Based on a recent study from the Ministry of Industry and Information Technology estimates 64million CDMA subscribers by 2012, whereas, China Telecom had originally expected a subscriber base of 100million by 2012. However, figures from the Mobile World database show that China Unicom ended Q1 ‘08 with just under 43 million CDMA subscribers.
According to the sources from telecom equipment companies, China Telecom, the to-be-operator of CDMA network, is scheduled to launch the CDMA mobile phones October 2008.
China Telecom, which is encouraged to take over the CDMA network from China Unicom, informed its plan to purchase CDMA mobile phones to device makers earlier in June. As per the sources, it is now working out on new CDMA customizing standards in order to ensure an abundant supply at lower prices for its subscribers.
Citing earlier reports, China Telecom has set a target of increasing the number of its CDMA subscribers to 100 million in 2009.In order to achieve this number and to expand the CDMA business, China Telecom plans to set up four new departments, namely individual user division, mobile service division, wireless network optimizing center and terminal customizing unit.
China has ordered phone companies to stop adding new customers in August so they can better focus on ensuring service for the Beijing Olympics, an Associated Press report said.
The moratorium on new phone and internet connections adds to sweeping measures, including traffic bans and factory shutdowns, that are meant to provide better conditions for the games, a major prestige event for the communist government, the report said, quoting employees.
“We simply won’t touch the network any more to ensure its stability for the Olympic Games,” said an employee of China Telecom, China’s main fixed-line carrier, who said he had seen an internal company memo on the subject. He asked not to be identified further because he was not authorized to talk to reporters.
The curbs will interrupt explosive growth in new business for mobile carriers, which the government says are adding 9 million accounts per month.
Existing customers should not be affected, said the phone company employees and a spokesman for the Beijing municipal phone regulator. They said the curbs apply to Beijing, several other cities with Olympic events and possibly additional areas.
Businesses have been warned for months of Olympics-related curbs on traffic, construction and other activities.
internet provider China Netcom Corp. distributed a notice to customers this week saying that they should not expect to add new accounts in August.
CNC will avoid installing equipment from August 1 to August 25 but might be able to open a new account if it requires no additional wiring, said a spokeswoman for the company who refused to give her name. The Olympics will be held August 8-24.
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China Telecom is courting foreign investors to help fund its plan to buy China Unicom’s CDMA mobile phone technology business, an AFP report, quoting state media said.
China Telecom said four or five companies have shown interest so far, the official Shanghai Securities Journal quoted China Telecom’s chairman Wang Xiaochu as saying.
Singapore Telecom, South Korea’s SK Telecom, and CDMA technology developer Qualcomm are among the possible partners, the report said.
China Telecom announced it planned to take over the CDMA business from China Unicom, the smaller of the nation’s two main mobile phone operators.
However, the deal will be costly at 110 billion yuan (€10.3 billion, US$16 billion), the AFP report said.
The acquisition plan is part of a long-anticipated shake-up of the country’s telecom sector aimed at increasing competition.
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The Wall Street Journal reports that Singapore Telecommunications (SingTel) is considering investing in China Telecom Corp, the world’s largest fixed line operator by lines in service. However, citing unnamed sources the report states that formal talks have yet to begin. SingTel, 55-owned by Singapore state investment company Temasek Holdings, holds stakes in mobile phone operators in India, Indonesia, Thailand, Philippines, Pakistan and Bangladesh. It also owns Optus in Australia.
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Chinese telecom stocks dropped more than 12% after China Unicom unveiled 25.8 billion euros (US$40 billion) in deals, with investors cashing out amid lingering uncertainty over Beijing’s industry revamp, a Reuters report said.
Unicom, smaller rival to China Mobile , said it was paying 15.5 billion euros (US$24 billion) to take over fixed line peer China Netcom and selling its underperforming network to China Telecom for over 9.7 billion euros (US$15 billion), the report said.
The moves are aimed at speeding up the roll-out of high-speed, third-generation mobile services for China’s 1.3 billion people.
Shares in Unicom, domestic fixed-line leader China Telecom and smaller player Netcom slid between 12.7 and 14.1%, shedding nearly $15 billion of their value during the trading day, the Reuters report said.
“There’s been profit taking because people were expecting too much in terms of a reform for the whole industry,” said Y.K. Chan, a strategist at Phillip Securities, quoted by the Reuters report.
“Now investors are focusing on acquisitions and capex for these firms to build their networks,” Chan added. “People realize that China Mobile’s dominant position is not going to weaken in the short term and the other players have to pay a high cost to compete.”
Lehman Brothers analyst Paul Wuh estimated that China Telecom, which will buy Unicom’s Code Division Multiple Access network, will spend at least 30 billion yuan (US$4.33 billion) in 2009 and a similar amount in 2010 on that network.
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China Unicom, a provider of mobile telephone services, agreed to buy a fixed-line operator for $24 billion and sell a wireless network for almost $16 billion as China began an overhaul of its telecommunications industry.
The overhaul, announced last month after years of delays, is intended to speed up the introduction of high-speed third-generation mobile services for China’s 1.3 billion people.
The deals give the country’s largest fixed-line operator, China Telecom, a foot in the mobile market while Unicom, the second-ranked mobile operator, gets a fixed-line company, China Netcom.
The advent of third-generation mobile services will mean China’s phone users can join those in advanced economies who already have speedy Internet access, games and extensive multimedia content, from maps to music, on their mobile phones.
Unicom will issue slightly more than 10 billion new shares to buy China Netcom at a ratio of 1.508 to 1 share of Netcom.
The deal is worth about 186.7 billion Hong Kong dollars ($23.9 billion) based on its last closing share price of 18.48 Hong Kong dollars and assuming no outstanding Netcom options are exercised.
It also agreed to sell the smaller of its two wireless networks to China Telecom and its parent firm for 110 billion yuan ($15.9 billion).
“This is the only way China Telecom is going to get into the mobile business,” said Allan Ng, of BOC International.
Analysts said Unicom seemed to win out in both deals and noted that it is getting Netcom at almost a 4 percent premium to its market capitalization of about $23 billion.
Shares in China Unicom, Netcom and Telecom have been suspended since May 23, when the government announced a series of telecom sector leadership changes. They are expected to resume trading on Tuesday.
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China has unveiled its long-awaited telecom industry restructure, merging the six state-owned carriers into three.
But officials once more stopped short of setting a timetable for the introduction of 3G, saying that licenses will be issued after the restructure is completed.
In a revamp that has been widely reported since early this year, fixed-line leader China Telecom will acquire China Unicom’s CDMA business and China Satcom.
The new Unicom will be formed by combining its GSM business with the smaller fixed-line operator China Netcom. China Mobile, whose market dominance has driven the reforms, will take over China Tietong, a small fixed-line company set up by the Ministry of Railways.
Each of the three carriers will receive a 3G license, although no details have been issued on what kind of technology each will adopt.
The changes, jointly announced by the Ministry of Industry and Information (MII), the State Reform and Development Commission (SRDC) and the Ministry of Finance on Friday morning, are the biggest reforms to China’s booming telecom sector since the formation of the MII in 1998.
The statement said the rapid growth of mobile had created “new problems in the structure and resource allocation in the telecom industry”. The widening gap between the operators was making the competitive structure “seriously unbalanced,” it said.
Last year China Mobile posted a profit of 87.1 billion yuan ($12.5 billion) – almost half as much again as the combined profit of the Telecom, Netcom and Unicom.
Almost certainly the reforms were agreed on several months ago, but it has taken some time to agree on the sensitive appointments of top executives at the new carriers.
The senior positions in the state-controlled corporations are all Communist Party appointments.
Friday’s announcement confirms China Mobile chairman Wang Jianzhou and China Telecom chairman Wang Xiaochu in their current posts. China Unicom chairman Chang Xiaobing is head of the “preparatory group” driving the Netcom merger and should retain his post.
The most prominent move is that of Netcom chairman Zhang Chunjiang to China Mobile, where he becomes party secretary. Unicom president Shang Bing is the new party secretary at China Telecom, while China Tietong chief Zhao Jibin and Unicom vice-president Li Zhengmao will also become Mobile VPs.
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- April 30th, 2008
- 12:33 pm
Chinese operator is first customer for Huawei’s core router cluster system, which claims to lower TCO by up to 60%.
The cost and complexity of increasing network capacity to cope with the growth in broadband customers and changing usage patterns presents a significant challenge to telecoms carriers, according to China Telecom.
“[There has been a] rapid and huge increase in the number of broadband users, and insufficient network capacity,” said David Chen, deputy managing director of China Telecom Europe, at Sofnet on Tuesday.
Operator challenges going forward also include a “very complicated network structure,” and the fact they have to “spend a lot of money on high construction and maintenance costs,” he added.
China Telecom ended 2007 with 35.65 million broadband subscribers, up from 28.31 million a year earlier and 21 million in 2005, representing an annual growth rate of 25%.
By the end of 2007, 85% of the telco’s broadband customers had services “at [speeds of] 2 Meg or higher, and 65% at 8 Meg,” added Ronald Raffensperger, director of core network marketing at Chinese equipment maker Huawei Technologies.
As the speed of downlink services grows, operators need to be capable of routing at least 10 terrabits per-second in data, said Raffensperger.
He recommends that rather than adding additional routers to the network, thereby multiplying the number of connections and making the network more complex to manage, operators should move to a cluster model.
“[Clusters] allow you to expand quite easily,” he said. They are simpler and “you have a lower cost of ownership.”
On Tuesday Huawei presented its Quidway NetEngine 5000E core router multi-chassis cluster system, which it claims is the first in the industry to provide 10 terrabits per-second of throughput.
Huawei introduced the 5000E router, capable of 1.28 Tbps of throughput, in 2004 and two years later enabled the connection of two together for double the bandwidth. “Today [we have]… the ability to go to eight clusters,” said Raffensperger. “That gives you 10 terrabits per-second of throughput.”
Raffensperger claimed that cluster system can generate total cost of ownership savings of between 40% and 60%.
Much of this comes from its reduced power consumptions and more efficient cooling, but also from the fact that it weighs less than traditional hardware and is more compact.
China Telecom is currently the world’s largest Internet service provider by customers, Raffensperger said. “They were our first customer for this cluster.”
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China Telecom Corp. said Monday that annual profits fell 13 percent last year as more customers switched to mobile phones.
Net profit in 2007 fell to 23.7 billion yuan ($3.4 billion), from 27.2 billion yuan in 2006, the nation’s largest fixed-line operator said.
China Telecom said income from its voice business fell 7.9 percent from the year before as the number of its access lines in service fell 1.2 percent to 220 million, from 222.7 million in 2006.
However, overall revenues climbed 1.7 percent to 178.7 billion yuan ($25.5 billion) from 175.6 billion yuan.
China Telecom is gearing up for a “full services offering” to expand its non-fixed line broadband and wireless businesses as it struggles to compete with cell-phone rival China Mobile.
“Although the intensifying market competition is a serious challenge to us, the upcoming full services offering will bring enormous business opportunities,” Wang Xiaochu, China Telecom’s chairman, said in a statement.
The company saw declines in virtually every area of its traditional phone business. Revenue from local phone services, which comprised nearly 40 percent of total operating revenues, fell 9.8 percent. Upfront connection fees dropped 33.7 percent; installation fees fell 6 percent; income from monthly fees declined 12.5 percent; and revenue from long-distance phone services sank 6 percent, China Telecom said.
China Telecom also said it incurred 572 million yuan ($81.7 million) in losses due to damage caused by severe snow and ice storms in January and February, a figure not reflected in the 2007 financial figures.
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China Telecom plans a US$4 billion contract for CDMA expansion (China)
