February 12, 2015 / 6:27 AM / 3 years ago

Merger speculation sends Chinese telecom shares higher

BEIJING (Reuters) - Shares of all three Chinese telecommunications carriers rose on Thursday following speculation on social media of consolidation in the sector that would see China Telecom Corp Ltd and China Unicom merge.

The speculation on social media service Weibo, which was downplayed by both China Unicom and China Telecom as well as industry analysts, sent China Telecom shares up 3.1 percent and China Unicom’s 3.5 percent on the Hong Kong Stock Exchange.

China Mobile Ltd was also speculated to merge with a provincial telecoms firm in Sichuan Province, sending its shares up 2.5 percent.

Bernstein analyst Chris Lane said the source could be traced to an article on a Chinese website.

“Unless there’s some other source where this is coming from, we’re quite surprised the market is reacting this much to that piece,” Lane said. “I think the chances of this happening is very low.”

China Unicom’s spokesman declined to comment, while a China Telecom spokesman said he was not aware of such a merger plan.

China Mobile didn’t respond immediately for its comment.

China’s telecom industry underwent a round of consolidation in 2008 that merged seven companies into the three major national carriers of today.

A merger of China Unicom and China Telecom would combine the country’s two largest fixed-line providers at a time when the government is pushing its state-owned carriers to become more efficient, free-market competitors.

Nomura analyst Leping Huang also downplayed the likelihood of a China Unicom-China Telecom merger.

“This would create a problem with a monopoly in the fixed-line market that would be very difficult to get around,” said Huang.

Reporting by Gerry Shih; Editing by Prateek Chatterjee

Our Standards:The Thomson Reuters Trust Principles.
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