Telecommunications Unions always merge when things get tough: the operator version of "The Wolf is Coming"

I wonder if you have noticed this strange phenomenon: whenever something big happens in the domestic telecommunications industry, news of a "merger" between China Telecom and China Unicom becomes a hot topic.

• China Mobile has the largest market share in mobile communications, and China Telecom and China Telecom want to merge to compete with it;
• Three 5G licenses may be issued, radio and television will enter the market, and China Telecom is likely to merge;

Yang Jie, Chairman of China Telecom Group, was transferred to China Mobile, and the merger of telecom and China Mobile is an inevitable trend.

The discussion of the merger of electric companies seems to be a real-life version of "The Boy Who Cried Wolf" at the slightest sign of trouble. Previously, some media divided the merger of electric companies into five steps, namely:

• Step one: senior leadership exchange;
• Step 2: Network co-construction and sharing;
• Step 3: Terminal joint customization;
• Step 4: Deep integration of business;
• Step 5: Capital integration and restructuring.

Netizens also published five predictions about the merger of telecom companies:

The constant rumors of mergers between telecom companies can be understood as a mentality within the industry. On the one hand, it is a call for change in the current unbalanced development of the telecommunications industry. On the other hand, it reveals the concerns of grassroots employees about future development during the transformation process.

From the perspective of market competition, China Mobile has a large gap in advantages over China Telecom and China Unicom. However, under the national requirement of increasing speed and reducing fees, coupled with the continuous penetration of number portability, the competition among the three major operators is becoming increasingly fierce. The direct competition in the terminal market is manifested in the following aspects:

• Competition in the 4G traffic market has made the “number barrier” dispensable: traffic has become the mainstream of the market and a rigid demand of consumers, the threshold of packages has been lowered, consumers’ dependence on numbers has decreased, and the “sense of existence” of numbers has become weak;
• The home broadband market is dominated by pipeline competition: apart from the simple addition of IPTV services, there are no further expansion initiatives.

From the perspective of grassroots employees, some netizens also made analyses:

Many people have heard the phrase "the wolf is coming" so many times that they not only don't believe it, but also analyze it through the goals of state-owned enterprise reform and the seizure of "supply sources":

Some people also said that China currently needs three "suicide squads" to expand its communications equipment companies. The content is as follows:

@winnyterry:

China's Belt and Road Initiative is the leading foreign trade strategy of my country in the past two five-year plans. In the communications industry, China is increasingly showing its desire to compete with the United States for global communications dominance. From this point of view, a common sense question: in the communications industry, those who can go out through the Belt and Road Initiative to participate in and dominate industry competition must be equipment vendors with technical capabilities, levels and patents, such as ZTE and Huawei. Operators, frankly speaking, have no actual technical capabilities, so the Belt and Road Initiative cannot rely on operators. But everyone knows that ZTE and Huawei have been sniped by Europe and the United States in the past few years, especially in 2018. The country is in great need of guaranteeing a mature and high-output market for ZTE, Huawei and other leaders of the Belt and Road Initiative in the communications industry in China, and giving them blood transfusions. Therefore, it is not difficult to understand why the three domestic companies are suppressed. The country wants the three companies to ensure that equipment vendors have sufficient capabilities and market share to participate in international competition through continuous industrial upgrading and repeated investment. The issue of waste or not, high efficiency or low efficiency is just a conclusion drawn by some outsiders from the perspective of operators.

The country is playing a big game, and in this game, the interests of the three major operators are expandable (can be sacrificed, or called the death squad). China's goal of dominating the global communications industry is very clear. In terms of patents, the mainstream standards of 1~3G are almost 0 (TDS is a non-mainstream 3G standard, and the patent share is about 7%, but it can be ignored in the entire global industry chain), 4G rises to 10%, and 5G rises to 30% (Huawei and Datang are the main contributors). However, 30% is not enough to shake Qualcomm and 3GPP in the United States, and the ITU group of snakes and rats who are deeply rooted in international communication standards and markets. China can only achieve its goal by continuously improving its dominant patent percentage through the industrial upgrading of 5G, 6G, 7G, and 8G. Among them, the problem of duplicate construction of the three major is not a problem at all in this game, and it must be duplicated. Because only by continuous repeated construction can domestic equipment manufacturers participating in the international communications war obtain a steady stream of financial support, market experience and a large enough market share.

From this point of view, the merger between China Telecom and China Unicom has certain advantages, but it is not a life-saving straw. To borrow a saying, diamonds have their brilliance and pearls have their elegance. Whether maintaining the status quo or merging, China Telecom and China Unicom will have to rely on themselves to figure out their way out.