Li Jinliang, professor and senior engineer of the China Electronics Technology Group Corp.'s No. 7 Research Institute, shares his opinions about China's ongoing telecom industry restructure in the latest Interfax guest column. Li is also chief editor of Mobile Communication magazine, an executive member of the council of the China Mobile Communication Association and chief expert of the WAPI Industry Alliance. Translated from the original Chinese by Iris Hong.

The government made a mistake in the previous telecom industry restructure by letting China Mobile focus on mobile communications and China Telecom on fixed-line telephony. The former is a sunrise business while the latter is a sunset business. The result of that restructure was that China Mobile grew so rapidly that its rivals simply have not been able to catch up with it.

A telecom restructure plan should be formed by canvassing public opinion, discussing with experts and finally, consulting with the government. So it is a pity [that for the latest restructure] such opportunity was missed, and experts and scholars are finding it difficult to understand why the government has made the decisions it has made.

I can only say that the new telecom restructure does not achieve the goal of balancing the telecom market and creating three players with comparable strength. For at least the next one to two years, China Mobile will remain the dominant player. In order to solve this problem, measures need to be taken in the future.

Although the new China Telecom will have a CDMA network, it will face a very a precarious situation. The CDMA network's reputation in China is not as good as that of the GSM network. This means that China Telecom's fixed-line and personal handy-phone system (PHS) subscribers may move to China Mobile's [GSM] network. Some people say that China Telecom is the biggest winner in the telecom industry restructure. I disagree. I think it is the biggest loser.

China United Communications Corp. (China Unicom) will gain fixed-line and PHS subscribers from China Network Communications Corp. (China Netcom). However, both these subscriber bases are shrinking. If China Unicom can migrate its fixed-line and PHS subscribers to its GSM network, it will be in a better condition than China Telecom.

China Mobile and China Telecom have both appointed the new company presidents and secretaries of their CPC (Communist Party of China) committees. However, China Unicom has only formed a preparation committee [and are yet to decide on their corporate leadership]. This means that many problems need to be solved in the integration of the two companies [editor's note: deciding on the make up of the leadership is seen as a key stage in deciding which of the two companies, China Unicom or China Netcom, will take the lead in their merger].The name of the new entity [China Unicom combined with China Netcom] has not even been decided. It will take at least half a year to one year to coordinate the two companies.

From the entire country's point of view, China's 2G network deployment was not planned well, and this caused consumers to suffer. Many people used to carry three handsets with them, one GSM phone, one CDMA phone and one PHS. If China uses three 3G standards in the future, consumers will have to again carry three handsets. Acting against the economic rules will cause redundant network deployment, wasted resources and all to no benefit for consumers. Telecom operators will also have limited growth prospects.

If China Mobile adopts TD-SCDMA, China Telecom CDMA2000 and China Unicom WCDMA, there will be a waste of state-owned assets and China Mobile will remain the largest telecom operator.

It will be very expensive for China to deploy three 3G networks [using three protocols]. There are now 300,000 base stations in China occupying 300,000 towers. According to my calculation, if one-third of the towers can be shared, it will save China RMB 30 billion ($4.37 billion). This is a substantial amount of money and these base station towers occupy an area that is almost the same size as Macau. Therefore, a lot of assets have been wasted.

In my opinion, China should only use homegrown TD-SCDMA technology for 3G deployment. The TD-SCDMA industry chain is already mature and ready for full-scale launch in China.

I once envisioned a plan that the three telecom operators work together to plan out and build up a nationwide TD-SCDMA network. Under such a plan, China Mobile would be responsible for under-developed areas such as Tibet and northwestern China and the other two operators would be responsible for more economically developed areas such as the southeastern coastal areas. In other words, a strong player would be responsible for tougher tasks and a weaker player for easier tasks.

The telecom operators play an important role in the telecom restructure. The operators' activities drive the whole equipment manufacturing industry. To equipment manufacturers, telecom operators are central. To telecom operators, we, the consumers, are paramount.