Bloomberg News

China’s Seizure of China Mobile Executive Leads to Wider Probe

June 01, 2011

June 1 (Bloomberg) -- China’s seizure of a China Mobile Ltd. executive on graft allegations in March led to a probe of more than 60 people that may involve 350 million yuan ($54 million) of “illegal money,” the official Xinhua News Agency said.

China Unicom (Hong Kong) Ltd., and China Telecom Corp., the nation’s second- and third-largest carriers after China Mobile, are included in the investigation, according to today’s Xinhua report, which didn’t say what the alleged corruption entailed.

The three operators are adjusting their business- cooperation policies “to reduce the corruption risk,” Xinhua said. The allegations come amid Chinese media reports that the government will overhaul leadership at the nation’s biggest telecommunications carriers.

The corruption probe may be an attempt to clear up any problems before new management takes over to allow them to start with a clean slate, Jim Tang, an analyst at Shenyin Wanguo Securities Co. in Shanghai, said in a phone interview today. If the investigation means China Mobile is addressing problems, it’s a good thing in the long run, he said.

Tang rates China Mobile and China Telecom “neutral,” and China Unicom “outperform.”

China Mobile gained 0.6 percent to HK$71.45 at 10:45 a.m. in Hong Kong Stock Exchange trading. The shares have dropped 7.5 percent this year, compared with a 2.7 percent advance in the benchmark Hang Seng Index. China Unicom fell 1.3 percent to HK$17.04 while China Telecom was unchanged at HK$4.66.

Executive Reshuffle

Sophia Tso, a Unicom spokeswoman, and Jacky Yung, a spokesman for China Telecom, yesterday denied reports about planned management changes at their respective companies. Tso and Yung didn’t immediately return calls today regarding the Xinhua report on the corruption probe.

Rainie Lei, a spokeswoman at China Mobile, didn’t return calls or e-mailed requests for comment on the reports about management changes.

Caijing magazine reported yesterday that Xi Guohua, vice minister at the Ministry of Industry and Information Technology, will replace Wang Jianzhou, 62, as chairman at China Mobile. China Unicom Chairman Chang Xiaobing will have his post taken by President Lu Yimin and become chairman of China Telecom Corp., while China Telecom Chairman Wang Xiaochu will become governor of Yunnan province, according to the magazine.

Zhao Yi, a spokesman for China Mobile, said he couldn’t immediately comment on today’s Xinhua report or provide contact information for Ma Li, the data department deputy manager who the official newswire reported was seized by anti-graft officials.

China Mobile’s value-added data such as mobile music services “were an essential driver of total revenue growth” last year, accounting for 31 percent of operating revenue in 2010, Chairman Wang said in March.

China Mobile said 549 million customers made use of value- added services in the first quarter of this year, and 476 million used its wireless music service. The value-added services were “the driving force” of sales growth in the first quarter, the company said in April.

--Edmond Lococo. Editors: Dave McCombs, Terje Langeland

To contact Bloomberg News staff for this story: Edmond Lococo in Beijing at elococo@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net


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