Rumor of telecom merger leads to share rises

Experts refute speculation of China Unicom, Telecom combining

Major shares linked to telecommunications in China rose on Thursday following earlier market speculations on social media that the country's second- and third-largest telecom carriers in terms of subscribers would merge.

The speculation, which was downplayed by China Unicom as well as industry analysts, sent the shares of the nation's second-largest telecom carrier surging by 8.37 percent Thursday, closing at 4.92 yuan ($0.79) on the Shanghai Stock Exchange.

The share price of China Telecom rose about 6 percent in the middle of its trading on the Hong Kong bourse, closing up 2.9 percent to HK$4.97 ($0.64).

China Mobile's branch in Southwest China's Sichuan Province was also speculated to have merged with the operator of a local broadcast & TV network, according to a Sina Weibo post by Mobile Information, a magazine based in Southwest China's Chongqing Municipality. The post sent the shares of the nation's biggest carrier up by 4.22 percent to HK$106.3.

China Mobile's spokesperson told the Global Times Thursday that he was not aware of such a merger. Both China Telecom and China Unicom declined to comment.

Calls to the Ministry of Industry and Information Technology remained unanswered by press time, but the top telecom watchdog was quoted by State-backed China Central Television (CCTV) on Thursday afternoon as saying that China has no plan to reform the current telecom structure at present, refuting the speculations.

Despite CCTV's report being posted on its Weibo account nearly two hours ahead of the Hong Kong stock market's closing time, telecom stocks still witnessed an overall rise.

Chinese investors have long been awaiting big news like mergers to stimulate the telecom stock market and are not easily calmed by official voices partly due to a lack of sufficient trust in the authorities, Ma Jihua, a telecom analyst with Beijing Daojing Consultant Co, told the Global Times Thursday.

Ma thought the speculations unreliable, attributing them to Shang Xiaopu, saying he often spreads similar rumors.

Shang claims to be a telecom industry writer on his Weibo account and has been spreading speculation about a merger between China Unicom and China Telecom as well as the combination of China Mobile and cable network companies since the beginning of January.

"Most of his disclosures cannot be true, as he [Shang] is not a senior executive who can secure knowledge of big partnership plans, just an employee of China Telecom's county-level branch office in Northwest China's Shaanxi Province," Xiang Ligang, a telecom expert and CEO of industry information portal cctime.com, told the Global Times Thursday.

The Mobile Information magazine, which failed to name its sources, put the consolidation down to overcapacity in the telecom sector, which analysts disagree on.

"Having three telecom carriers is a reasonable setup, which ensures full and positive competition as well as facilitates a reduction in telecommunications service costs," said Xiang.

There is no need to merge two together, otherwise this would lead to monopolization, Xiang remarked.

China carried out a round of consolidation in the telecom sector in 2008, merging seven companies into the current three national carriers, Reuters reported on Thursday.

Xiang also said that it is impossible to combine telecom carriers with local cable network companies, which are too small in scale.

The State Administration of Press, Publication, Radio, Film and Television (SAPPRFT) has been trying hard to integrate its resources to meet the State Council's call for the integration of telecoms, Internet broadband, and radio and TV services, which the analysts said may be facilitated with the help of telecom carriers.

However, the administration, which does not have an effective management mechanism, needs to consolidate the cable TV networks in every province into a combined entity, otherwise they cannot have a strong voice in partnership with China Mobile or any other carriers, Xiang noted.

According to the 21st Century Business Herald's report on May 28, 2014, the SAPPRFT set up a company, with registered capital of 4.5 billion yuan, to integrate cable networks across the country. But the scale is still too small even in comparison to the third-largest carrier China Telecom, which raked in 16.2 billion yuan in net profit in the first three quarters.

"The different supervision system in the two sectors also hinders the combination of telecom carriers and cable networks," said Ma of Daojing Consultant Co.