Chang Xiaobing, chairman and chief executive officer (CEO) of China Unicom, said the tie between his company and China Netcom could generate a complementary effect.

Analysts, however, say the heavy attraction toward mainland telecommunication firms will be short-lived.

Linus Yip, a strategist at First Shanghai Securities, predicted that China Telecom, Unicom and Netcom will open high after trade resumes today, but he said there will be strong selling pressures afterward.

"Investors should take profits as soon as possible as the news of restructuring is absorbed by the market," Yip said.

The candidates involved are relatively optimistic about the effects of the reshuffle. Chang said the merger with Netcom and disposal of CDMA businesses could optimize the company's operations and lower its debt ratio, predicting its GSM segment could garner a 23 percent share of the mobile market.

But he recognized that Unicom is still significantly lagging behind the market leader, China Mobile. "We're striving to capitalize our strength and narrow the gap between our competitors," he said.

As for China Telecom, Chairman and CEO Wang Xiaochu painted a positive picture for the company's newly acquired CDMA business from Unicom, saying the segment will become profitable in 2012 with its enormous growth potential.

He added that the customer base of CDMA is about 41.9 million, despite its penetration rate of just 51 percent.

Asked when the CDMA assets will be injected to the listing arm, Wang said it depends on the financial status of the listing arm, and that the company has to weigh the interest of its minority shareholders.

On the other hand, Yip believes the long-term impact of the restructuring will be seen in just six months to one year, and it is still unable to estimate how much revenue China Mobile will lose to the new competitors, including the joint venture of Unicom and Netcom, as well as China Telecom.

"For China Mobile, I do not see great buying that could force a strong rebound," Yip said. He believes that only under HK$110 will be a safe level for bargain hunting of the stock.

Still, Louis Tse, a managing director of VC Brokerage, believes that it will take some time for the new competitors to develop their systems.

"China Mobile will still have a honeymoon period of six months to one year," Tse said, predicting that the stock will be more stable after its big plunge last week.

But he agrees that there will be selling pressure for Unicom, Telecom and Netcom, as some short-term warrant investors who have bought into the restructuring news will sell after the week-long trade suspension.

The major speculation theme that investors are riding on is that China Telecom and its parent company will spend 110 biilion yuan to purchase the CDMA busines from China Unicom, while Netcom and Unicom will form a joint venture.

(HK Edition 06/03/2008 page2)