China Telecom is the top fixed-line operator in China, followed by China Netcom and China Tietong.

China has been trying to introduce more competition into the telecom industry. China Mobile has the dominant position with nearly 400 million subscribers, while fixed-line users are turning to cell phones.

The extreme structural imbalance was bad for the industry's development and the revamp would boost competition by letting all three restructured groups develop a full range of businesses, said Everbright Securities analyst Zhou Liqian.

The number of mobile users jumped 36.2 million in the first four months of 2008 to 584 million, while fixed-line users dropped 5.4 million to 360 million.

Corporate annual reports showed that China Mobile's revenues equaled those of China Telecom, China Netcom and China Unicom combined last year, while its profit was double that of the three together.

"It was an important signal for China's stepped-up reforms to break monopolies in sectors like telecoms and railways," said economist Gao Fan at Shanghai's Fudan University. But real competition will require more efforts to lower the barriers to entry and diversify the participants, said Gao.

The much-anticipated restructuring seemed unlikely to solve all the problems, said professor Zeng Jianqiu at the Beijing University of Posts and Telecommunications.

"There will still be three fixed-line operators, just as at present, which won't reduce the duplicated construction and vicious competition that have plagued the fixed-line sector," said Zeng.

He noted the combination of China Unicom and China Netcom could be difficult to begin with, as both were disadvantaged compared with their bigger rivals and the effect of the changes had yet to be seen.

Analysts said they also expected the kick-off of restructuring to give impetus to the country's preparation for third-generation high-speed wireless services (known as 3G), which require huge investments.

"The reshuffle could speed up the development and application of new technologies," said Wang Feng, wireless service manager at the real estate information website Soufun.com. "It's good news for consumers."

(Xinhua News Agency May 24, 2008)