21st Century Business Herald, 3/07/12
An industry source reported recently that China Mobile (NYSE: CHL; 0941.HK) plans to become a shareholder in consolidated national cable TV operator China Radio and Television Network. Since the second half of last year, the source said, senior China Mobile executives have held multiple meetings with the China Radio and Television Network planning group, led by Zhang Haitao, to discuss partnerships. The two companies have reportedly reached consensus on a framework for the cooperation. According to a source at China Mobile's Guangzhou subsidiary, the two companies have already signed a three-year partnership agreement covering cooperation on cable broadband services, and are in ongoing discussions regarding capital partnerships.
At the beginning of February this year, the plan for the national-level China Radio and Television Network passed review by the State Council's network convergence workgroup and was submitted to the State Council for approval. The new national network company could be officially formed in June of this year. Government agencies responsible for oversight of the telecommunications industry will join the State Administration of Radio, Film and Television (SARFT) in a soon-to-be-formed new governmental agency tasked with oversight of China's broadcast and internet industry. According to industry speculation, current SARFT deputy director Zhang Haitao could be appointed chairman of the board for the national network company, with a China Mobile vice president possibly being named president of the company.
Though China Mobile is licensed to operate fixed-line networks and has an international internet gateway, broadband networks are a weak point for the operator, whose fixed-line subsidiary China Tietong serves an extremely limited customer base. China Mobile would need to use China Radio and Television Network's existing network to break the broadband duopoly of rivals China Unicom (NYSE: CHU; 0762.HK; 600050.SH) and China Telecom (NYSE: CHA; 0728.HK). Since the start of network convergence efforts, however, cable operators have been in danger of losing their nearly 5 mln broadband subscribers, particularly following the launch of telecom operators' "optical city" FTTx upgrades in certain cities last year. A partnership between China Mobile and China Radio and Television Network would be a chance for the two companies to make up for one another's weaknesses.
Editor's Note: For related news about possible investment by China Mobile in the broadcasting sector, please see "China Mobile: May Invest in CMMB Joint Venture" MD 3/06/12 issue.