中国通讯业开始的重组，旨在推动第三代移动服务的中国标准——TD-SCDMA。但是，这一标准是否成熟，能否实现产业化是问题的关键所在。市场似乎不看好这一标准，中国移动的股票一路下跌，三分之一的市值已蒸发。这也反映出中国企业的两难选择，如何将中国企业做大做强。


On May 24, 2008, as China was mourning the loss of lives and properties to the devastating Sichuan earthquake, the Ministry of Industry and Information, the National Development and Reform Commission, and the Ministry of Finance, also created shockwaves. This time the shock came from an announcement about restructuring China’s telecommunications sector.

 

The government-orchestrated sweeping restructuring will mean several mergers and acquisitions within the telecommunications industry. In particular, China Mobile Communications, the world’s largest mobile phone company in terms of the number of subscribers (some 400 million as of this writing), will take over China Railway Communication, or Tietong, the smallest of the three fixed-line carriers; China Telecomm, the largest fixed-line provider, will acquire the CDMA network from China Unicom, another mobile carrier, and the basic telecommunication business from China Satellite Communications; finally, China Unicom will merge with China Netcom.

 

The restructuring also preludes the issuance of licenses of the third-generation (3G) mobile communications, the service that will support high speed video, Web access and other services.  (I don’t quite understand this point.. ‘ultimate goal’ and ‘long awaited issuance’.. who was waiting for the licenses and who was driving the goal?) In other words, as the result of the restructuring, China will have three telecommunications operators – China Mobile, China Telecomm, and China Unicom, each having both fixed-line and wireless services, the latter being the segment that has enjoyed drastic growth. The market and consumers have been long waiting for the upgrade of wireless service in China.

 

Just as in the U.S. when AT&T was broken up into Baby Bells, other companies were able to participate effectively in the long distance phone market and compete with AT&T, the Chinese approach is designed to achieve the same effect. That is, the monopoly of China Mobile will be broken and competition will be spurred as China Unicom and China Telecomm may challenge the domination of China Mobile.

 

But some analysts commented that the restructuring is too late as it is impossible for China Unicom and China Telecomm to challenge the dominant position sanctioned by the government. So when China rolls out the 3G service, China Unicom and China Telecomm will use the more mature WCDMA- and CDMA-based technologies respectively and China Mobile will shoulder the responsibility to promote TD-SCDMA, the so-called Chinese 3G mobile standard, which is widely believed to be technologically inferior. In doing so, the government expects to balance China Mobile’s monopolistic power.

 

It is well known that the Chinese government has been especially eager to promote the domestic 3G standard TD-SCDMA as part of a broader push for “indigenous innovation” (zizhu chuangxin) that the government hopes will help wean the country from expensive foreign technologies.  The rationale goes like this: As a big sibling in the family, China Mobile should contribute more and even sacrifice some. So far, China Mobile has tested the TD-SCDMA standard in some Chinese cities; and it is exactly the problems with the technology that have caused the government to delay the rollout of commercial 3G services. The Chinese standard has never been used outside China.  Therefore, by promoting the TD-SCDMA standard, China Mobile may incur a negative consequence that may damage the company financially.

 

Indeed, this is what the market has perceived. China Mobile, a likely loser in the process, has been penalized as its share price dropped in Hong Kong and New York: some HK$204 billon (or US$26 billion) of the market cap was lost in one session! In the meantime, the shares of its potential competitors in mobile communications business – China Unicom and China Telecomm – have been surging.

 

It is well known that China Mobile is probably one of the most tech-globalist (having an open  mind in technology acquisition regardless of the sources as long as it is most advanced) Chinese companies, and also has been picked as a national champion to become a true MNC. In fact, China Mobile ranked number 78 in Forbes’ “Global 2000 – The World’s 2,000 Biggest Public Companies” for 2008 and ranked 180 on the list of Fortune “Global 500” in 2007. 

 

The restructuring of China’s telecommunications service sector has sent a confusing signal – the TD-SCDMA push for the sake of pursuing “indigenous innovation” as it stands now could ruin the business prospect of China Mobile as a national champion. This reminds us of the regret Deng Xiaoping had after his realization of the consequences of the delayed opening-up of Pudong in Shanghai – if the region had been selected as a special economic development zone earlier, its impact on China’s opening-door agenda would have been more significant. Will a similar kind of thing happen to China Mobile several years down the road?