China has reportedly instated a ban on adding new phone and Internet connections in Olympic cities for the month of August. But the move, some analysts say, will likely have minimal impact on the explosive growth of China's telecoms sector.

The government-issued order would bar the four main operators--China Telecom, China Mobile, China Netcom and China Unicom--from signing up new subscribers in Beijing, Shanghai, and several more possible Olympic venues, which may include Tianjin, Qingdao and other areas. The measure, which company employees revealed to journalists, is intended to ensure the stability of networks during the Olympic Games Aug. 8-24. Official confirmation of the ban could not be obtained.

Various analysts have played down the likely impact on the rapidly growing telecoms industry, which reported a five-month revenue increase of 9.6% over the comparable period last year, to $48 billion. They point out that most of the phone companies' average 9 million new subscribers each month have come from areas outside of the cities likely affected by the ban.

Deutsche Bank released an industry alert noting that the cities in question already exhibit high penetration of phone service and Internet coverage. They are estimated to produce less than 2% of new mobile and land-line subscribers, which come overwhelmingly from "second and third-tier markets," cities, counties and towns less developed than provincial capitals and affluent cities.

Hong Kong-based analyst Allan Ng, who tracks telecommunications for BOCI Research, estimates that about half of new subscribers to China Mobile, the phone company with the largest customer base in the world, come from rural areas. He also predicts that the earnings impact may be greater for China Netcom, whose coverage areas are mostly northern cities, such as Beijing, Tianjin, Qingdao and Shenyang, which are also hosting Olympic events, than on China Telecom, whose primary Olympic coverage area is Shanghai.

The Deutsche Bank alert foresaw likely loopholes in the ban, observing that "the operators are notorious for finding means of circumventing such edicts," such as by allowing users to "pre-reserve" numbers. Demand for new accounts will likely rebound in September, softening the impact on earnings, it concluded.

Nearly one in two people in China are mobile-phone users, and the country's roughly 600 million mobile accounts are the most numerous in the world.

In May, the government announced plans for major restructuring of the telecom sector to even out competition among phone carriers. (See " Telecom restructuring to help little guys ") The growth of China Mobile, which posted profits of $12.5 billion last year, has far surpassed that of Telecom, Netcom or Unicom, as the pace of mobile subscriptions has outgrown that of land lines. China Telecom is a fixed-line operator, and Unicom and Netcom are smaller players in the mobile field.

In Friday trading in Hong Kong, China Mobile concluded the session 1.7% lower, at 104.40 Hong Kong dollars ($13.38). China Telecom was down 3.4%, to 4.21 Hong Kong dollars (54 cents). China Netcom declined by 0.5%, to 20.85 Hong Kong dollars ($2.67). China Unicom was down 2.4%, to 13.96 Hong Kong dollars ($1.79).

Source:forbes