China phone providers merge in $56b deal

Monday's reports have three of China's six telecommunications companies undergoing government-mandated mergers and acquisitions. A share swap totaling an equivalent of $56.3 billion will see cellular network provider China Unicom acquire land-line provider China Netcom. Under the agreement, each Netcom share will be traded for 1.5 new China Unicom shares, with the companies expecting to seal the deal by year's end. At the same time, China Unicom companies will sell their CDMA network and associated business to China Telecom, the world's biggest land line and broadband provider, for an equivalent of $15.9 billion.

The sale of the CDMA network involves China's Unicom Group and Unicom New Horizon receiving $9.5 billion for their CDMA network, and China Unicom Corporation Limited paid $6.3 billion for its CDMA operations. China Unicom is currently the country's sole CDMA provider, with 42 million subscribers as of last year, and will give new owners Telecom "a solid foundation upon which to build and develop the next generation mobile business and service."

The deals represent the biggest thus far in a government-ordered telecommunications restructuring announced late in May. Merging the six companies into three groups would allow for a more competitive industry and prevent a monopoly.

At more than 360 million subscribers, China Mobile is the world's biggest cellular network provider, although it primarily relies on the GSM network. The company recently announced it would begin testing a TD-SCDMA data network, a new standard developed inside China meant to serve as an alternative to HSPA and other costly Western-made formats.

Filed under: Investor, industry
Other story tags: China, Merger