• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

More State-Owned Firms Could Merge

Posted on: Tuesday, 2 August 2005, 18:00 CDT

The merger between State-owned conglomerates China Electronics Corp (CEC) and China Great Wall Computer Group Co could spark large- scale mergers and acquisitions between firms controlled by the State.

In a short notice posted on its website, the State-owned Assets Supervision and Administration Commission (SASAC) confirmed that the Great Wall Group will be merged with CEC .

The merger, which will create a company with assets of more than US$6 billion, could potentially speed up regulators' efforts to reshuffle industries such as the telecom sector, said Eagle Zhang, general manager of research house Analysys International's consulting division.

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

This job change, engineered by the SASAC, is believed to have been a move designed to help the merger.

In addition, the SASAC swapped the top executives of the top four listed telecom carriers, including China Mobile, China Unicom, China Telecom and China Netcom, last November.

Analysts said the swap, like the transfer of Chen Zhaoxiong from CEC to the Great Wall Group last May, might be a prelude to the reshuffling of the domestic telecom industry.

Zhang said it was possible to merge the top four telecom operators into three firms, although the reshuffle might be "painful" at the start.

"I think it is a good option to split up China Unicom's cellular networks and merge with other operators to better utilize State- owned assets," Zhang said.

The analyst said he believed the SASAC, the watchdog for the State-owned assets, will push forward consolidations in various industrial sectors to reduce redundant companies.

Wang Xiaochu, general manager of China Telecom Corp, has publicly proposed to buy one of the networks run by China Unicom.

SASAC minister Li Rongrong has said the domestic telecom sector will "definitely" be restructured.

But Wang Guoping, an analyst with China Galaxy Securities, said it will be very difficult for the SASAC to consolidate the four telecom carriers as they are all listed overseas.

Both CEC and Great Wall are either suffering from heavy losses or underperforming in the market.

However, all top four telecom carriers are ringing up profits, and some may resist a potential reshuffle.

Source: China Daily; North American ed.

More News in this Category