Jefferies said 3G wireless data will drive significant change in China Telecom landscape over the next two years.

"While change has been moderate so far since the telecom restructuring, Jefferies China TMT analyst Cynthia Meng expects more significant market share shifts in the coming two years and reiterates China Unicom as her industry top pick. We view the growth in 3G data and increasing handset subsidization as positive for Apple Inc. and Motorola Mobility," said Peter Misek, an analyst at Jefferies.

In the two years following the industry wide telecom restructuring in China, total industry telecom services revenue share barely changed, despite a about 500 basis points shift from China Mobile in wireless subs market share in favor of China Telecom's (CHA) CDMA.

Industry profitability further skewed toward China Mobile from second half of 2009 to first half of 2011, as China Unicom and China Telecom have been aggressively promoting 3G through handset subsidies while the majority of their existing subs are still mid-to-low-end 2G users.

For China Unicom, increased 3G-related depreciation expense was one of the factors eroding its bottom line since second half of 2009.

As more mass market subscribers adopt low-cost smart phones (sub-1,000 Chinese yuan or $150), and start to enjoy 3G wireless data, Misek expects to see accelerated 3G wireless migration and data adoption in China.

Like us on Facebook

Further, Misek holds the view that a much more significant industry market share shift among the three carriers in both quantity (subscriber share) and value (revenue and profitability) will take place in the next two years. His top pick within the Chinese telcos remains China Unicom (CHU).