TELECOMS: Better Bosses Needed In Coming Telco Shuffle

Update: Since writing this post, China Telecom and Unicom have both announced that they will swap chairmen. Wang Xiaochu will resign from China Telecom and become head of Unicom, and Chang Xiaobing will resign from Unicom and become head of China Telecom. (Unicom announcement, China Telecom announcement)

Bottom line: A rumored shake-up in the top ranks of China’s big 3 telcos is long overdue, but will only be effective if Beijing installs experienced, marketing savvy managers rather than the usual government bureaucrats.

Leadership shuffle coming at big 3 telcos?

I was largely dismissive of the first reports to emerge last week of a brewing shake-up for the leadership at China’s big 3 telcos, saying the basis for the speculation didn’t seem too solid. But the chatter continued to gain momentum at the end of last week, leading me to change my view and predict that perhaps much-needed change is on the way and could be announced soon.

The buzz began when media first reported that the telecoms regulator had called a meeting last Friday of top leaders of China’s big 3 state-run telcos, China Mobile (HKEx: 941; NYSE: CHL), China Unicom (HKEx: 763; NYSE: CHU) and China Telecom (HKEx: 728; NYSE: CHA). (previous post) Now media are reporting that the Ministry of Industry and Information Technology (MIIT) has called another meeting for Monday, and some are citing unnamed sources saying that the main topic is a big leadership shuffle.

If the buzz is accurate, this would be the first major such shake-up for China’s big 3 telcos since another major shuffle about a decade ago. That earlier shuffle looked like a game of musical chairs, and saw top executives from the various telcos take up positions at their rivals — something that could only happen in China where such positions are more like government postings than real management jobs.

But this latest shuffle — if it’s really coming — could hold out the possibility for some reform of this stodgy trio of telcos that are some of the world’s slowest moving and least innovative despite their monopoly in the world’s largest telecoms market. That could occur if Beijing finally decides to install some real managers with savvy marketing skills at the helm of the telcos, replacing the government bureaucrats that have traditionally run all 3. Early signs don’t look too good, however, for reasons I’ll soon explain.

The latest reports are quite varied, with some saying a change is definitely coming while others still only say a change might come. (English article; Chinese article) The most definitive of the reports says that China Mobile Chairman Xi Guohua will be replaced by MIIT Vice Chairman Shang Bing, and that Unicom and China Telecom will also see their top managers replaced.

Unaware of Changes

A separate report quotes China Mobile’s Xi Guohua saying he’s unaware of any upcoming changes, as he responded to a reporter’s question at a media briefing last Friday. (Chinese article) Yet another report cites a memo reportedly from China Telecom chief Wang Xiaochu dated August 24, saying he will resign from his post to take up a position somewhere else. (Chinese article) The other top executive also reportedly on the way out is long-serving Unicom chief Chang Xiaobing.

Frankly speaking, I’ve grown quite disillusioned with all 3 of these company chiefs and won’t be sad to see any of them go. Of the 3, China Telecom’s Wang Xiaochu and Unicom’s Chang Xiaobing have been running major telcos for much of the last 2 decades and neither has produced a world-class company. I had bigger hopes for Xi Guohua when he took over at the helm of China Mobile 3 years ago, in one of the only leadership changes over the last decade. But even Xi has been a big disappointment, and has done little to innovate.

These particular leadership changes would come as Beijing is trying to breathe more creativity into big state-run companies like the telcos, energy companies and banks that have a dismal record for innovation. The report that an MIIT vice minister will take over at the helm of China Mobile doesn’t look too encouraging, as it would mark a continuation of the old policies of promoting bureaucrats to such positions. But we’ll have to wait and see some formal announcements, which hopefully will bring some more experienced managers to these companies to help them become more dynamic.

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