Any hopes from foreign telecom operators that China's recent fragmentation of its telecommunications sector would usher in a new era of decreased monopolization should be chagrined that the Ministry of Industry and Information Technology of China has just issued a circular that requires China Telecom (CHA), China Mobile (CHL) and China Unicom (CHU) to promote the sharing and co-construction of telecommunications infrastructure.

According to the circular, the initiatives went into effect on October 1, 2008. The existing telecom towers and lines of the three Chinese telecom operators must be opened to their rivals. If conditions are not ready for sharing, operators should expand and adjust their technologies to realize better cooperation. If an operator plans to build new telecom towers and lines, other operators should be informed of it within ten working days if they have such facilities to share or plan to join the construction of the new facilities. Other facilities of base stations and transmission lines should also be shared or co-constructed if conditions are appropriate. No exclusive agreement is allowed when any operator wants to rent facilities from a third party.

The circular also says that once irregular activities of telecom operators are found, the Ministry of Industry and Information Technology and the State-owned Assets Supervision and Administration Commission of the State Council will handle the punishments. The relevant departments can punish the responsible people in accordance with the varying degrees of severity and people who are dismissed for these reasons should not be appointed new positions within three years.

Statistics from the National Audit Office of China show that from 2002 to 2006, China's five major telecom operators, including China Mobile, China Telecom, China Unicom, China Netcom and China Tietong, invested a total of about CNY1.12 trillion in the construction of telecom infrastructure. Because of the lack of planning, duplicitous construction is quite serious and the utilization of networking resources are low, of which the utilization of the communications cables is only about one-third while the overall costs in depreciation and maintenance are increased.

Therefore, MIIT issued the circular to reduce the repeat construction in telecom industry, to save land, energy and materials, so as to build an energy-saving and eco-friendly society. However foreign telecom operators might view this new edict as a move towards enhanced consolidation and oligarchic rule among China's telecom companies.