CHINA Telecom, the country’s largest fixed-line operator, may merge with mobile carrier China Unicom, as part of a long-awaited shake-up of the world’s largest telecom arena, the Financial Times reported Thursday.

China Mobile, the country’s largest mobile carrier, may also merge with No. 2 fixed-line operator China Netcom, the newspaper reported, citing a source at China Telecom.

While China Telecom and China Unicom are trying to avoid duplication in their Personal Handyphone System (PHS) units, the two companies could probably merge in time, the source was quoted as saying.

Meanwhile, China Telecom, keen to receive a license to operate high-speed third-generation (3G) mobile services, is eager to acquire or tie up with a mobile phone network, the source added.

A spokesman at China Telecom declined to comment on the merger report. Spokespeople at China Mobile declined to comment.

China Unicom Ltd. and its rival China Mobile are slugging it out to sign up customers in smaller cities and the countryside — a war that will keep chipping away at margins.

China Mobile on Thursday reported a stronger-than-expected 25-percent rise in first-half net profit, helped by growth in revenue from value-added services and an increase in subscribers

Net profit for the six months ended June 30 was 37.9 billion yuan (US$5 billion), up from 30.2 billion yuan a year earlier.

The longer-term prospects for China’s mobile operators depend on when the country’s homegrown 3G technology takes off.

Most analysts expect China to issue 3G licences before the 2008 Beijing Olympics, but some now predict licenses will not be handed out until 2009. And market watchers expect the launch to come after a restructuring of the domestic telecom industry. (SD-Agencies)