Chinese Telcos Unlikely to Consolidate in Next Two Years

Published Date : Dec 09, 2015

Chinese telecommunication and wireless companies are unlikely to consolidate in the next couple of years, as the profitability of small firms has not declined to the level where the major players in the industry would be benefitted. Instead, smaller companies or operators are expected to seek more number of collaborations in the years to come. Network sharing collaborations are expected to improve efficiency. There might be consolidations in the near future if these measures are not able to strengthen the smaller operator’s profitability and competitive positions. 

According to the reports from Fitch, even if collaborations happen in the years to come, it is not expected that China Telecom’s and China Mobile’s credit profiles will be considerably reduced. Involvement of a non-cash merger between China Unicom and China Telecom is expected to be one of the most likely restructuring plan. It is also expected that China Telecom would accept a non-cash acquisition of CUHK. The resulting entity after the acquisition is likely to observe large cost synergies on broadband services and mobile services. 

China Unicom and China Telecom are expected to face competition from the big companies such as China Mobile. The licensing of 4G time division long term evolution (TD-LTE) technology to China Mobile that happened in 2013 has assisted China Mobile to regain its market position that it had lost in the 3G technology era. Till the end of 3rd quarter 2015, 4G users accounted for 30% of mobile subscriber base of China Mobile, compared to 23% for China Telecom. To compete with China Unicom and China Telecom, China Mobile should offer fixed-mobile bundling after the acquisition of China TieTong Telecommunications Corporation (TieTong). It is expected that China Unicom would adopt an aggressive strategy in 4G network in 2016. China Telecom and China Unicom are to explore extensive fiber network sharing opportunities to tower sharing as suggested by the government.