China Telecom chairman under investigation as anti-graft probe widens

by Reuters
Monday, 28 December 2015 10:30 GMT

* Chairman is latest executive ensnared in anti-graft crackdown

* Analysts play down impact on telecom sector reforms

* China Telecom shares fall 1.3 pct in Hong Kong (Adds analyst comment, share reaction)

BEIJING/HONG KONG, Dec 28 (Reuters) - The chairman of state-run China Telecom Corp Ltd is being investigated for alleged disciplinary violation, the ruling Communist Party's anti-corruption watchdog said, the latest senior executive to be caught in an anti-graft dragnet.

The official, Chang Xiaobing, is "suspected of serious violation of discipline", the Central Commission for Discipline Inspection said in a statement on its website on Sunday.

It did not provide further details.

Local Chinese media outlets reported on Sunday that China Telecom's Chang had gone missing.

China Telecom, in a statement on Sunday, referred to the anti-corruption watchdog's comments. "The company currently maintains normal business operations," it added.

Chinese President Xi Jinping's corruption investigations have already included leading politicians, bosses of state enterprises and senior bankers. The party watchdog cracked down on more than 70 senior officials at state firms in 2014.

The investigation into Chang is unlikely to delay prospects of reforms in China's telecoms industry, some analysts said. China is taking steps to make its state-owned sector more efficient and responsive to market forces as part of a wider reform programme.

In February, an official at China's telecoms regulator denied speculation in online media that China Unicom and China Telecom would merge, after shares in the two companies surged. But speculation about mergers and acquisitions in China's telecom sector has not died down.

"My gut feel is that this is nothing to do with the telecom sector consolidation," said Dan Baker, senior equity analyst at Morningstar.

"This is probably to do more with weeding corruption out of the system. I would have thought the rotation of the leadership positions some months back would have been a precursor to the industry consolidation," Baker added.

Chang was chairman of telecoms group China Unicom, before becoming China Telecom chairman. Born in 1957, Chang was Party chief at China Unicom before assuming his post at China Telecom in August this year, China's official Xinhua news agency said on Sunday.

China Unicom and China Telecom are two of China's top three telecom service providers. Shares of China Telecom fell 1.3 percent on Monday, in line with a 1 percent drop in the benchmark Hang Seng index. China Unicom shares shed 0.6 percent.

Earlier this month, Fosun International Chairman Guo Guangchang was reported to have gone missing. Fosun said he was helping police with an investigation. He reappeared at a meeting in Shanghai several days later.

His alleged disappearance prompted speculation the firm was being drawn into Beijing's corruption crackdown.

At the Shanghai meeting, Guo did not say where he had been, or make any reference to a Fosun statement that said he had been assisting the Chinese authorities in an investigation. (Reporting By Winni Zhou and Norihiko Shirouzu in BEIJING, Denny Thomas and Daria Hsu in Hong Kong; Additional reporting by Brenda Goh in Shanghai; Editing by Jane Merriman and Muralikumar Anantharaman)

Our Standards: The Thomson Reuters Trust Principles.