A senior telecommunications insider has disclosed today that prior to the 2007 Spring Festival, China Telecom and China Netcom, China's top two hardlink operators, had signed an agreement that China Telecom will reduce its investment and stop conducting business in the north, while China Netcom will do the same in the south.

The insider even analyzed that China Telecom and China Netcom are very likely to incorporate into one sometime in the future.

The recent actions of the two operators may have implicated the possibility that such an agreement was in place. On January 16, China Netcom has announced that it will transfer its telecommunications assets and business in Guangdong and Shanghai to China Telecom and the proposal has been approved at the special general meeting of shareholders on February 14th. However, officials from China Netcom and China Telecom denied the existence of such agreement.

As early as May 16 of 2002, China Telecom has been ended its monopoly in hardlink operations. Following it, China Telecom divided its subsidiaries in ten provinces in the north to China Netcom, only retaining its subsidiaries in 21 provinces in the south and the west. However, the two companies have been still engaged in competitive business in the areas of their counterparts.

Restructuring among telecommunications operators has never been stopped before the 3G license was issued. The current incorporation between China Telecom and China Netcom is undoubted a new restructuring plan. "There is great chance that the two operators will amalgamate. As both of them are hardlink operators, their joining will be beneficial for them to conduct mobile business. However, right now, it is still hard to infer how the 3G license will be distributed," said an anonymous analyst.

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