The End Of An Era: Chang Xiaobing Under Investigation For Alleged Corruption

(Chinese Version)

A specific era always ends with a representing figure’s exit from the stage. In this case, Chang Xiaobing has been a major figure that represents the golden era of the Chinese telecom industry. Chang Xiaobing had been the leader at the China Unicom for over ten years and was accused of receiving bribes recently six months after he became the leader of China Telecom. On July 11th, the CCDI (Central Commission for Discipline Inspection and Supervision) announced the proceeding of the investigation on Chang Xiaobing’s alleged bribery case, marking the end of the era he represents.

The golden era: Wild and fast growth and irrational prosperity

Chang Xiaobing’s career path correlates deeply to the reform and development of the Chinese telecom industry. Chang is not only the rule maker in the industry, but also the executor. Whether it’s in the Chinese telecom industry’s regulation mechanism, developmental model, or the growth structure, you can always find Chang Xiaobing’s influences.

In 2000, Chang Xiaobing was appointed from the Telecom Bureau as the vice president of China Telecom. From that very moment, started the rapid growth period of the Chinese telecom industry. It was also that very year that other industry leaders started to rise and the top three telecom operators dominated the market. Furthermore, during that period state-owned enterprises started to go public both in overseas stock market and domestic market. Modern corporate management structure which fits the logic of modern economy also became the mainstream in that year.

Perhaps at that time, Chang Xiaobing himself didn’t realize that he and his peers would be the main leads on the stage of the Chinese telecom industry and bring about different achievements in the coming decade either.

In 2004, Chang Xiaobing was appointed to China Unicom, at which company he then worked for 12 years and eventually became the leader of the company. During Chang’s 12-year leadership, not only China Unicom, the whole telecom industry in China had been on a rocket launching off the ground, entering an era of wild growth. For a long time the Chinese telecom industry was dominated by the 2G mobile communication technology. In the wild growth era, the industry quickly entered the 3G domain and then fast forwarded to 4G, with the user base expanding fast and furiously to the population limit.

At that time, Chinese telecom industry leaders worked to find ways to create opportunities to boost growth, whose efforts are reflected on the massive text messaged jokes, the irrational prosperity of Monternet, the rapid expansion in the rural market, as well as the public’s craze for 3G communication technology and iPhone.

However, where the glorious light shines lurk the shadows. The irrational competition and overly-fast development of the industry also resulted in endless spasm text messages that had plagued many users’ phones, ugly competition in the school markets. Some operators even secretly cut down their competitors’ wire to cause trouble. The three telecom companies didn’t want to allow interconnection among their users either at that time.

As the leader of the China Unicom, Chang Xiaobing might have a different opinion on the irrationality and wild growth during that period. When Chang Xiaobing was appointed to China Unicom, China Unicom had been using CDMA for two years. As the new leader, Chang had to deal with the major internal conflict that GSM and CDMA had been causing for a long time.

On China Unicom’s 10th anniversary, an industry said that: “There were only two telecom operators in the world that used two different communication technologies in the 2G era. One is China Unicom, the other is Japan’s KDDI.”

Due to the fact that there is homogeneity between the two different technologies both in scale and capability, the telecom operators would have to deal with the severe internal competition that comes from the homogeneity. Such issues are shown in the aspects of different Internet developmental positioning, resource allocation, and the coordination of the user market.

To solve this problem, Chang Xiaobing had to wait for four long years until 3G was licensed in 2008. Chang then sold CDMA’s license to China Telecom who had been after CDM for a very long time, ultimately getting rid of CDMA.

I believe Chang Xiaobing was in ecstacy at that time. To be able to focus on the new trending communication technology WCDMA later proved to be a turning point for China Unicom as his peers continued to suffer from self-property right.

For Chang Xiaobing, another big challenge he had faced at China Unicom was the merger with China Netcom. The constant changes in personnel and the organizational structure were the issues Chang Xiaobing had to deal with. I believe these issues must have exhausted Chang’s energy in some sense. Every merger or restructuring has been a major internal damage to China Unicom, as shown in the fact that China Unicom’s market performance didn’t have a high surge even though it had the upper hand in the 3G era. Instead, China Unicom kept missing great opportunities.

The internal environment, or let’s say, inner crisis, is considered as the Chang-led China Unicom’s Achilles' Heel by the industry. The internal competition of two different network technologies and the personnel crisis occurred after merger and restructuring, no doubt drained China Unicom’s energy to move further.

Figure of the year: a demanding manager

Perhaps people still remember that Chang Xiaobing was the figure of the year in economy in 2010.

As a matter of fact, Chang Xiaobing is the only person that has received this title in the telecom industry. The reasons for this achievement are simple: In the 3G era, he connected China Unicom’s image with iPhone; Winning the 3G battle, he won flower baskets contributed by 13 million people; Connecting three networks, he brought the communication terminals into the service kingdom.

In his thanking speech, Chang Xiaobing stated that the most meaningful destination in 2010 had been Xiangshan, for the fact that besides going to Xiangshan for hiking every weekend, the China Unicom had an essential meeting which focused on the development direction during the key period for the company. The conclusion reached in the meeting decided that China Unicom would transform towards 3G from 2G.

Even before he started to lead China Unicom, the industry had described Chang Xiaobing’s management style as a sharpness rarely seen in the industry.

His management methods suited the needs of that era. In a way, it was the choice of the time.

But as the demanding leader who had been leading China Unicom for many years, Chang didn’t solve the core issues existing in the internal management. After getting the 3G license in 2008, besides managing the personnel, Chang Xiaobing also adopted a centralized operation strategy, which weaken the power of local managers through centralizing information and marketing strategy. Today many people are still criticizing this method, saying that it kills the flexibility that’s needed to operate innovatively for China Unicom. However, the China Unicom at that time was very efficient and the elites controlled the whole company. It was definitely a great scene which many industry insiders envied.

The regret: missing the opportunity to make use of 3G and hesitated to enter the 4G era

Chang Xiaobing established the 3G differentiation strategy for China Unicom but the company had been struggling every year. The debt rate of China Unicom was skyhigh as 65%. Every year it needed a short-term financing to inject itself with 30 or 40 billion RMB to expand the market. The deepest impression people have on China Unicom in the 3G era is the cooperation with Apple and the company’s open minded attitude toward the mobile Internet as it started to gain traction in 2009.

However, missing the opportunity to fully make use of the 3G era was definitely something Chang Xiaobing had been regretful about all along. China Unicom at that time had the most advanced and mature network, abundant terminal options, and was teaming with Apple. But after the rapid growth in the early phase, the marketing strategy and fast upgrading phenomenon also led to the sudden downfall of user growth for China Unicom.

In early 2013, the telecom industry started to consider adopt 4G while China Unicom, led by Chang Xiao, was still considering TDD license and FDD license, trying to maximize 3G’s dividend through 3.75G (HSDPA) and the simultaneous development of 3G and 4G. That said, China Unicom failed to see the immense potential that 4G had and the momentum it had gathered.

This is a matter of strategy. The senior management team plans the strategy and is therefore responsible for the mistakes that occur. Chang Xiaobing must have reflected on the mistakes he had made.

Chang Xiaobing, former senior manager at China Unicom, is now under investigation for alleged corruption. As an experienced and seasoned industry leader in the field of telecom, Chang Xiaobing was part of the driving force that had shaped the telecom industry into what it is today. Despite Chang’s current situation, his influences upon the industry remain. His downfall marks the end of an era in which the telecom industry was having a wild and explosive growth.

But what we should really think about is that whether the situations created by Chang Xiaobing and his peers during the “golden era” are still affecting the current industry despite the fact that the demographic dividend can no longer provide any edge for the telecom industry. Furthermore, OTT giants are also in for the kill, bring up new chaos in the market. New players are also entering fast to the industry. Should the Chinese telecom industry let the elites run the industry or give professional managers the power? Is it better for the market to be driven by supply, or the demand?

Perhaps, the ultimate question we should think about here is whether we are indeed waving goodbye to the “golden era” in which chaos accelerated growth, or we are once again creating another chaotic industry.

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[The article is published and edited with authorization from the author @ZhiGang Boils Telecom, please note source and hyperlink when reproduce.]

Translated by Garrett Lee (Senior Translator at PAGE TO PAGE), working for TMTpost.