The break-up of China's largest fixed-line operator
China Telecom by the
State Council signals further reforms in China's telecommunications
industry as the country formally entered the World Trade
Organization yesterday.
"The announcement came at a special time and may be a signal of
further opening up to the world," said Renee Gamble, a senior
telecom analyst with the worldwide IT research firm International Data Corporation (IDC)
Asia-Pacific.
"Chinese telecom operators have been keen on listing overseas, and
the split will enhance their competitiveness and make them more
attractive to foreign investors," she added.
A
spokesman for the Ministry of Information Industry (MII) confirmed
yesterday that the State Council had approved the split up of China
Telecom and that MII is authorized to execute the plan.
China Telecom will be split into two companies by regions.
The assets of the present China Telecom in North China's Beijing
and Tianjin municipalities, the Inner Mongolia Autonomous Region
and Hebei and Shanxi provinces, Northeast China's Liaoning, Jilin
and Heilongjiang provinces, Central China's Henan Province and East
China's Shandong Province will merge with China Netcom Co
Ltd and China
Jitong Network Communications Co Ltd.
The new company will be named China Netcom Group Corp.
China Telecom's assets in the other 21 provinces, municipalities
and autonomous regions will retain the brand name and intangible
assets of the old China Telecom.
Both companies are allowed to build a local telephone network and
operate local fixed-line services, and each should provide equal
and fair interconnection to the other, the break-up plan
dictates.
The new China Netcom will inherit 30 percent of the old China
Telecom's national backbone network, with the rest going to the new
China Telecom.
The restructuring is aimed at sharpening the competitive edge of
the two operators and curbing the profit declines.
"There will be tough competition between the two companies, so new
services will be very important to them," Gamble said.
She also pointed out that since both companies can build networks
and operate in each other's areas, they will also set an example
for the interconnection of all telecom operators. That has been a
major headache for smaller companies such as China Railcom.
Gamble predicted the restructure would also solve a major obstacle
for the listings of both companies. Yet given the complexity of the
implementation of the break-up, their listing might not be possible
for at least a year, she said.
The final approval for the split also brings good news to telecom
equipment makers, as the delay of the break-up of China Telecom has
made some operators postpone progress of infrastructure
construction.
The present China Telecom had about 140 million subscribers, 157
billion yuan (US$19 billion) in revenue.
(China
Daily December 12, 2001)