The real reason behind the antitrust case is a fight for interest amid government’s efforts to push ahead with the so-called “triple-play”—a push for convergence between telecoms, broadcasting and the internet.
A seemingly “simple” antitrust probe over China Telecom Corp. and China Unicom (Hong Kong) Ltd., the country’s two main fixed-line operators, has become a rattle as the media shows unusually zeal.
This has been the first time for state-backed big names to be under investigation since the establishment of the antitrust law in 2008, after the official CCTV broadcast that the two companies may use their monopoly positions in the broadband Internet access market.
China Unicom, China Telecom may suffer
Broadband businesses are regions where the two companies are likely to see growth opportunities in the future, Sinolink Securities telecom analyst Chen Yunhong told the Capital Week.
China Unicom (600050.SH) has set aside 73.8 billion yuan in capital budget in 2011, mainly targeting at the broadband businesses and the coverage of 3G networks, public data available shows.
China Telecom posted some 50 billion yuan and China Unicom reported 30 billion yuan in revenue on broadband alone last year, a top official with the price supervision bureau of the country’s top economic planner told CCTV.
The two companies own some 90 percent of broadband businesses in the country, which could be described as monopoly with “dominant market status”, said Li Qing, a vice director general with the National Development and Reform Commission.
If the NDRC’s accusation is upheld, China Telecom and China Unicom may both face billions of fines. Moreover, once considered as monopoly, the companies’ broadband businesses may suffer, leaving the hundred million market “carved up” by their competitors.
Shares in China Telecom fell more than 5 percent in Hong Kong immediately after the CCTV broadcast, before regaining much of the loss and ending down 0.4 percent. China Unicom shares dropped more than 6 percent before recovering, and ended up 2.5 percent.
“Triple-Play” Behind the row
The real reason behind the antitrust case is a fight for interest amid government’s efforts to push ahead with the so-called “triple-play”—a push for convergence between telecoms, broadcasting and the internet.
The State Administration of Radio Film and Television (SARFT), the country’s broadcasting watchdog, has been active in pushing the NDRC to investigate on the antitrust case.
The SAFFT, which lacks a “license” to operate broadband businesses, may take the opportunity to enter into the telecom industry, and continue with its sole management on the internet in the process of the “triple play”, an industry source said.
Broadband businesses have supported profit growth for both China Telecom and China Unicom; however, 99 percent of Internet operators under the SARFT and most of the secondary telecom operators are in the brim of deficit in the sector.
“This event has given the SAFFT a wonderful opportunity,” industry expert Wu Chunyong said.
The SAFFT has been in fight with telecom operators for rights to control and export the content of the Internet Protocol Television ever since premier Wen Jiabao called on the launch of the “triple play” in 2010.
Source:caijing