News apparently from Datang reveals that the Chinese government has decided to merge the two stated-owned telecom equipment makers, Datang Telecom and Potevio, before the end of 2010.

According to a report on the English-language website of China Daily, upon the completion of the merger, the new company will become the third largest telecom equipment manufacturer in China, following Huawei and ZTE. It also said that the government's move aims to reduce the number of state-owned enterprises and to promote the development of the Chinese-grown TD-SCDMA telecommunications standard.

The merger plan is reportedly raised by the State-owned Assets Supervision and Administration Commission of the State Council and is expected to be implemented at the end of 2010 or the beginning of 2011 if everything goes smoothly.

Datang Telecom is one of the core promoters of the TD-SCDMA technology and Potevio is a leading information technology equipment maker and service operator in China. Due to the weak financials of the two companies, the merger was taken into consideration by the Chinese government early in 2007, but was postponed initially.

Commenting on the rumor, representatives from both concerned parties said they had never heard about news from official company sources.