A new round of Chinese telecom industry restructuring, rumors of which sent share prices of leading players higher on Thursday, is unlikely to happen this year, according to an analyst in Hong Kong.
Analyst Alex Ng Lik-hang of China Merchants Securities (HK) Co. said fresh industry consolidation may not turn into reality in 2015, the Hong Kong Economic Journal reported Friday.
Chinese media have been speculating about a government-led merger at the group level that would involve China Telecom Corp. (00728.HK), China Mobile (00941.HK), China Unicom Hong Kong (00762.HK) and Shaanxi Broadcast & TV Network Intermediary Group Co. (600831.CN).
According to the speculation, China Telecom and China Unicom would be merged.
Given the recent merger proposal for the country’s two rail makers, China South Locomotive & Rolling Stock Corp. Ltd. (01766.HK) and China CNR Corp. Ltd. (06199.HK), it is not surprising that there is also talk of a similar move for the telecoms industry, Ng said.
But any such consolidation is still some time away, he said.
China’s top three telecoms groups established late last year a joint venture company with a view to reducing capital expenditure by consolidating resources invested in the construction and maintenance of transmission tower and related fixed assets.
Some market observers say the rumored new round of industry consolidation could be seen by Beijing’s current regime as a way to end the influence of former leaders such as Jiang Zemin.
Ng, however, noted that the merger, if it comes about, will mark a reversion to the old days of a monopolistic industry.
Given the uncertainty surrounding the industry, some market watchers say investors might be better off if they avoid Chinese telecom stocks for two to three years.
Translation by Vey Wong
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