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Telecom Companies 'Could Be Merged'

Four major Chinese telecom-equipment makers - China Putian Corp, Datang Telecom, Alcatel Shanghai Bell (ASB) and Wuhan-based FiberHome Technologies Group could be merged, according to market reports.


Beijing-based China Internet Weekly yesterday reported that such a merger, pushed by the State-owned Assets Supervision and Administration Commission (SASAC), could happen before the end of this year, creating a super conglomerate in the telecom industry.


However, all four companies denied that a merger was imminent.


The report comes hot on the heels of the merger of State-owned electronics giants China Electronics Corp (CEC) and China Great Wall Computer Group Co, approved by the SASAC earlier this month.


CEC had total assets of 39.6 billion yuan (US$4.88 billion) in 2003 while Great Wall Group's current total assets stand at 12.2 billion yuan (US$1.5 billion).


Putian's Vice-President Tao Xiongqiang told China Daily that he was "unaware" of any merger plans, adding that the company is focusing on restructuring its sprawling businesses.


He Shuping, president of Shanghai-listed FiberHome, also denied any knowledge of the merger.


SASAC Minister Li Rongrong last year said "some big players in major industries should be merged," He told China Daily, "but FiberHome is small."


Putian had total assets of 33.74 billion yuan (US$4.17 billion) in 2003 while FiberHome's assets stand at around 3 billion yuan (US$370 million).


The total assets of Shanghai-listed Datang stood at 5.74 billion yuan (US$708.6 million), according to its financial report for the first quarter of this year.


Datang and ASB, too, denied that a merger was in the offing.


A spokesman for SASAC refused to comment.


Despite the denials, some analysts believe the possibility of a merger to be high.


"Given SASAC's previous approach to large State-owned enterprises under its administration, I believe the merger is very likely," said Edward Yu, president of Beijing-based research house Analysys International.


"The merger could possibly happen within six to eight months."


A swapping of top executives is usually a prelude to the restructuring of State-owned conglomerates.


For instance, Chen Zhaoxiong, current chairman of Great Wall Group, was vice-president of CEC before he joined Great Wall last May.


Cao Bin, former deputy general manager of Putian, became deputy general manager of Datang Telecom in June.


He is now also the acting general manager of Datang Telecom and a member of the board.


SASAC last year swapped the top executives of the four major listed telecoms carriers China Mobile, China Unicom, China Telecom and China Netcom.


Yu said there is heightened need for regulators to restructure the domestic telecom manufacturing sector before the hand-out of the licences for 3G mobile telecoms networks.


"Only the big and strong ones can survive (in the upcoming 3G market," he said.


The top 100 electronics firms including Putian and Huawei Technologies recorded a profit of 4.8 billion yuan (US$592 million) in the first five months of this year, down 53 per cent year-on-year, according to the Ministry of Information Industry (MII).


An industry-wide underperformance could spark large-scale restructuring, Yu noted.


(China Daily August 23, 2005)


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