Date
20 July 2019
With China Mobile getting a new chairman and China Telecom left headless for now, there is speculation that Beijing may be mulling another major overhaul of the industry as it prepares for the 5G era. Photo: Reuters
With China Mobile getting a new chairman and China Telecom left headless for now, there is speculation that Beijing may be mulling another major overhaul of the industry as it prepares for the 5G era. Photo: Reuters

China Mobile leadership change: What does it portend?

As China Mobile gears up for launch of 5G services, Beijing has appointed a new leader for the nation’s biggest mobile operator, fueling fresh speculation in the market about the government’s plans for the telecom sector.

According to an announcement Monday, China Telecom chairman Yang Jie has stepped down from his post to take the top job at the larger state-owned wireless carrier China Mobile.

China Mobile’s erstwhile chairman, Shang Bing, is leaving his position due to age, as per a regulatory filing from the telecoms giant.

Interestingly, there was no word from Beijing on who would replace Yang at China Telecom, meaning that the position has been left vacant for now. 

Not surprisingly, the latest developments have sparked chatter among industry observers as to whether Beijing is laying the ground for another restructuring of the nation’s telecom assets.

Ensuring smooth and efficient rollout of 5G networks is a top priority for the government, with cooperation as well as competition seen desirable among the top three telcos — China Mobile, China Telecom and China Unicom.

There had been rumors in the market in the recent past that Beijing might be looking to merge China Telecom and China Unicom in order to create an entity that could offer stronger competition to China Mobile.

China Mobile currently controls about 60 percent of the market, leaving the other two players fighting for the remainder and putting them in a far weaker position.  

Following Yang’s departure from China Telecom, if the top post at the firm is left unfilled for long, it will only serve to heighten speculation about a potential integration of the firm with Unicom, some analysts have pointed out.

Meanwhile, it is also possible that Beijing’s moves could be linked to 5G and other goals for the telecoms industry.  

The State Council, in its annual work report, has said that the average fees for mobile data will be cut by more than 20 percent in China this year.

According to the work report unveiled by Premier Li Keqiang, there are also plans to allow phone users to switch their mobile network operators without having to change their phone numbers.

Competition among the three operators will only intensify as the government wants operators to lower the service fees, while also posing a challenge for the firms to retain customers with new service plans once the mobile number portability is fully in place.

As authorities seek to drive service fee down through government policy rather than market forces, the reason for the existence of three state-owned network operators is no longer valid, some observers have pointed out.

The government, as a matter of fact, has been consolidating resources in the telecom sector in a bid to avoid duplicated investment. The creation of the infrastructure entity China Tower, for instance, is a clear example of Beijing’s bid to eliminate unnecessary mobile network capital expenditure by having the three operators share assets such as base stations and transmission towers.

Such cooperation could prove crucial in the 5G era as the high frequency band service requires a massive number of cell sites or sensors to be installed at the roadside for various uses. Common infrastructure can help better utilize network capacity as well as lower the capex burden of the wireless carriers.

Taking specifically about China Mobile, despite its overwhelming lead in the industry, there is still room for the firm to utilize its market position better to strengthen its business and boost revenue.  Yang, its new chairman, can help in this regard as he has first-hand experience in unlocking the potential of assets to drive growth.

During his tenure at China Telecom, Yang unveiled a concept of “one ecological tree with four branches”. The move, in 2016, pointed out the direction for China Telecom at that time. The tree referred to China Telecom, while the four branches were the new businesses beyond connectivity.

Helped by the policy direction, China Telecom has seen the user numbers for its smart connections exceed 570 million, and the number of its smart home users top 110 million. Also, government and enterprise customers reached 23 million in number, and there were more than 80 million users of Internet of Things services.

As the government seeks to further drive down service fees, China Mobile will need to quickly diversify its revenue sources to support its growth. Yang, with his experience at China Telecom, could indeed prove to be the right man for the job at the No. 1 carrier.

Such thoughts, however, won’t put an end to this question: Does Beijing have something bigger in mind as it shuffles the top brass among the state telecom operators?

The story, as they say, may be just beginning. 

– Contact us at [email protected]

RC

EJ Insight writer

EJI Weekly Newsletter

Please click here to unsubscribe