China Netcom posts lower profit

The largest wireline telco in China reported declines in profit, average revenue per user, overall voice traffic and other areas. China Netcom officials said mobile substitution was the culprit. Mobile competition is especially tough for China's wireline incumbents because other than their limited wireless local loop offerings like Netcom's personal handyphone system, they don't offer wireless services. China Netcom's results are likely a harbinger for wireline competitor China Telecom's earnings report next week.

Meanwhile, there's a chance China's wireline players could get some help from the government, something you wouldn't see happen in more deregulated countries like the United States (at least not so overtly). The government could split up mobile carrier China Unicom and give the assets to China Netcom and China Telecom to help them compete against dominant mobile foe China Mobile, a move that would breathe new financial--and strategic--life into the wireline firms.

For more:
-The Standard reports on China Netcom's financials
-And The Wall Street Journal (Sub. req.) also has earnings details and further coverage of potential market restructuring

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