China is overhauling its telecoms industry in an effort to make it more competitive and pave the way for the launch of third-generation services.
The radical restructuring of the state-owned sector will result in a series of mergers and asset swaps.
Beijing wants more competition for dominant provider China Mobile and the proposed changes led to an 8% fall in the firm's shares in Hong Kong trade.
China is the world's largest mobile phone market, with 520 million users.
Fragmented
China Mobile accounts for more than 70% of the market.
It and other firms have been targeting out-of-town and rural areas in a bid to boost subscriber numbers.
The restructuring will reduce the number of firms operating in China's fragmented telecoms sector and is designed to assist struggling fixed-line operators.
Among the firms involved are China Unicom, China Telecom, China Netcom and China Satellite Communications.
Foreign firms will not be affected since they are currently excluded from direct involvement in the market.
China's telecoms regulator has ordered the mergers and asset swaps to proceed as quickly as possible. Once this is completed, it will begin issuing licences for lucrative 3G phone services such as mobile internet and video.
Experts believe this will provide a huge opportunity for foreign operators whose investment in technology is seen as vital to getting new services off the ground.
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