China Telecom, Unicom ink strategic agreement

China United Network Communications Group Co Ltd and China Telecommunications Corp inked a strategic resource-sharing deal on Wednesday, dispelling rumors of a possible merger between the two firms.

The deal is the latest joint efforts by the country's second- and third-largest carriers to take on industry leader China Mobile Communications Corp.

Under the pact, China Unicom and China Telecom will share resources to jointly build networks, explore innovative Internet businesses, as well as negotiate international roaming rates.

Yang Jie, general manager of China Telecom, said: "The agreement has nothing to do with industry restructuring or any merger of China Telecom and China Unicom."

Yang said the deal will also involve capital cooperation, but did not offer any further details.

Last month, China Telecom chairman Chang Xiaobing resigned after he was detained and put under investigation for suspected corruption.

Lu Yimin, general manager of China Unicom, said the two companies are highly complementary in terms of resources. "Our top priority is to implement the partnership at the provincial and county levels."

China Unicom's shares rose 3.84 percent to HK$8.66 ($1.11) on Wednesday after jumping as much as 5.5 percent on the Hong Kong Stock Exchange. China Telecom's shares also climbed 4.82 percent to HK$3.48.

The agreement came as the two companies are trailing China Mobile in both 4G base stations and 4G users.

Experts said rather than a merger, a comprehensive partnership is a better option for China Telecom and China Unicom.

"If a merger takes place, it will take at least two to three years for the two telecom giants to fully integrate their talents and resources, given their huge size," said Xiang Ligang, founder of the telecom industry website cctime.com.

"It will, in fact, become a burden and distract their time and energy away from catching up with China Mobile," he said.

As of November, China Mobile has built more than 1 million 4G base stations and its 4G subscribers amounted to 287 million, more than China Telecom and China Unicom combined.

Fu Liang, a freelance industry expert, said the agreement covers a wide range of areas and highlights the senior executives' desire to cooperate with each other.

"The team-up will challenge China Mobile's dominance to some extent. But how big a pie they can take away from China Mobile will hinge upon on how well the two companies implement the partnership at grassroots level," he said.

Leaders of the two companies' cloud computing units were also present at the signing ceremony. "It indicates that China Telecom and China Unicom may also join hands in areas such as cloud computing and Internet data centers," Fu said.