China Unicom has signed a cooperation agreement with China Telecom. The two operators say they plan to build a new industry paradigm through open cooperation and resource-sharing (including networks, business and services) as well as exploring cooperation at various levels. The two partners also plan to promote structural reform on the supply side, with regard to networks and handsets. With this agreement, China Unicom and China Telecom hope to reduce costs while improving operating efficiency and to provide better networks and services to customers. By doing so they will support the Chinese government’s “Internet Plus” strategy, which is supposed to promote better internet access across the country.

During times of major disasters and emergencies, the two operators will help each other’s business recovery, with a view to increasing their ability to safeguard emergency communications. China Unicom and China Telecom intend to expand their handset offerings and to jointly promote six-mode handsets with all-network access as a national standard. They will also enhance network interconnection quality and upgrade the quality of international roaming service through joint cooperation with overseas operators.

Tarifica’s Take

China Unicom and China Telecom currently lag very far behind the number-one operator, China Mobile, which has over 825 million customers, of which over 287 million are 4G/LTE users. China Unicom, on the other hand, has only 180 million customers, while China Telecom has 141 million. We believe that while structural reforms are necessary, the agreement on the part of the number-two and number-three operators to join forces has been made with the intention of mounting a better challenge to the market leader. However, China Mobile’s dominance is so extreme that it is not likely that the move will put a significant dent in it—so much the more so because this is not a merger but only a cooperation agreement.

Nonetheless, the promotion of a national standard for smartphones by the two operators will likely put pressure on China Mobile to adopt it as well, and to some extent will level the playing field and make 2G, 3G and 4G networks equally accessible across the country. Users would benefit from a standardized smartphone environment, because SIMS that are fully interchangeable across operators would make it easier to switch providers without buying a new phone. That would lead to increased competition and more customer freedom.