China Unicom Merges With Guoxin Paging in a Major Boost for the Upstart Telecom
(5/4/99) China Unicom has merged with Guoxin Paging Corp., China's
largest paging company, according to the May 3 Nanfang Ribao
(Nanfang Daily).
The merger was one of several moves announced yesterday that
indicate that Beijing is finally getting serious about supporting China
Unicom, the company originally created to compete with the inefficient
state-run monopoly, China Telecom.
Since it was created in 1994, China Unicom has had a hard time
achieving its raison d'etre due to a chronic lack of funding, limited
access to existing telephone networks, and resistance from the
Ministry for Information Industry (MII), China's telecommunications
regulator and a fierce protector of China Telecom.
Now, that resistance appears to be fading. The merger of China
Unicom and Guoxin was itself approved by the MII. The ministry also
granted China Unicom exclusive rights to establish a nationwide cell
phone network that operates on the CDMA standard, the newspaper
said. The network will rival China Telecom's GSM cellular network.
In addition, the MII authorized China Unicom to provide internet long
distance as well as internet access services, the newspaper reported.
China Unicom is the country's second largest telephone company, yet
with only 5% of the cellular market, and operating only one land line in
China (in Tianjin), China Unicom lags far behind the de facto monopoly
China Telecom.
Won't Abandon GSM
It hopes to capture 30% of the cellular market by 2003 by means of a
new development plan announced on Sunday, the newspaper said.
Guoxin Paging, which plans to seek a domestic listing this year, will
provide China Unicom with a much-needed source of capital. Made up
of dozens of pager operators throughout China, it has 39.5 million
subscribers and 60% of the domestic market. Its revenues for the first
quarter of this year were RMB 2.3 billion (US$272.1 million) – three
times those of China Unicom for the same period. It has RMB 13
billion (US$1.6 billion) in assets and made a profit of RMB 1.5 billion
(US$175.7 million) last year.
The MII has also granted China Unicom exclusive rights to operate cell
phone networks on the CDMA platform. The telephone operator plans
to spend RMB 7 billion (US$84.6 million) this year to add two million
lines to its existing network, the newspaper reported. Next year, the
company plans to have a capacity of 10 million lines and to operate in
160 cities. By 2003, the company aims to capture 30% of the cellular
market, with a capacity of 50 million lines and 35 million subscribers.
China Unicom will take over the operations of existing trial CDMA
networks in Beijing, Shanghai, Guangzhou and Xi'an that are currently
operated by another telecom company, Great Wall.
However, China Unicom will not abandon its cell phone networks
operating on the GSM platform, the cellular standard in China, the
newspaper said. It will invest RMB 23.8 billion this year to expand
capacity by 5.7 million lines, bringing its total capacity to over 9 million
lines and its total number of subscribers to over 4.5 million. Hitting
these numbers means that the operator would account for 10% of
GSM network users in China.
The operator will offer internet protocol (IP) long distance phone service
in Beijing, Shanghai, Guangzhou and Shenzhen in June. The long
distance market until now has been restricted to China Telecom. The
company will spend an estimated RMB 3.7 billion (US$447.4 million)
on establishing IP service this year, the newspaper said.
China Unicom will also establish broadband outlets so that it can
provide internet access service. However, since there is little profit to
be made as an internet service provider in China, the investment here
will be far smaller than for the other projects, the newspaper said.
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