One tiny step for reform, one decent bounce for a share price. On Monday China Unicom, the country’s second mobile carrier by subscriber numbers, said it was being considered for a pilot run of ownership reform for state-owned enterprises. This two-year-old plan, aiming to improve returns on state assets, would enable partial private ownership alongside the state, a so-called mixed ownership. Yesterday, its H shares (a quarter of the company is listed in Hong Kong) popped as much as 6 per cent.

China Unicom needs a shake-up. With mobile penetration in China exceeding 90 per cent, the structural growth story is done. During upgrade cycles, Unicom has suffered from its relatively small scale; it was slow, for instance, to introduce 4G. A distant number two to China Mobile, Unicom has been a market follower, winning subscribers mainly on price. That shows up in its share performance; since 2010 Unicom has returned minus 10 per cent. China Mobile is up by more than half. The telecoms sector is familiar with government reform. Last year, Beijing pushed mobile operators to combine their infrastructure assets in a new entity, China Tower, reducing capital expenditure across the sector. What “mixed ownership” would entail is still unclear. But it seems unlikely that an anticipated merger between Unicom and number three player China Telecom(also Hong Kong-listed), will go ahead. Instead, expect a search for a strategic investor — the government has said a stake sale to an “industry giant” is one option.

Baidu, Alibaba or Tencent are likely candidates, says Jefferies, but there is no obvious appeal for them.