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Telecom changes in China

June 03, 2008|From the Associated Press

HONG KONG — China pressed ahead with a restructuring of its telecommunications market Monday as mobile phone company China Unicom Ltd. announced plans to take over a fixed-line provider and sell off a cellphone business.

The country's No. 2 mobile operator said it would acquire China Netcom Group Corp. in a share swap valuing the fixed-line operator at $23.8 billion.

That represents a 3% premium over Netcom's last closing share price.

Separately, China Unicom and its parent said they would sell the code division multiple access mobile network and accompanying business to China Telecom and its parent for $15.9 billion.

China Telecom is the country's biggest fixed-line operator.

The moves were expected as part of a government-mandated shake-up of China's telecommunications sector unveiled late last month. That plan called for the country's six telecom companies to combine into three groups in a bid to create a more competitive industry and prevent a dominant operator from monopolizing the market.

The deals could help China Unicom and China Telecom compete with the country's cellphone heavyweight, China Mobile, the world's largest mobile provider by subscribers.

China Telecom could expand its new cellphone business with its current fixed-line customers; China Unicom could grow its current mobile business with the new fixed-line subscribers.

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