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CITIC Cable and Wireless Broadband Technology Co Ltd (CCWBB), one of the few Sino-foreign joint ventures in the Chinese telecom market, is expected to sharply reduce employee salaries. It has also halted its drive to recruit new customers.

 

It says both developments are due to technical, market and competitive problems.

 

According to an e-mail sent to China Daily, CCWBB has set up a seven-member working committee to take over the management of daily affairs from the current management team.

 

"There has been a serious shortfall in revenue, margins and cash," according to the e-mail, which was sent to all company employees on Monday.

 

The committee will try to maintain services to existing customers and reduce company expenditure to a minimum.

 

The e-mail said the CCWBB board had decided "not to develop new customers."

 

Sources close to the company said CCWBB, which formally began operations in August, has more than 100 customers.

 

These use the firm's services to connect offices in different locations to an internal Internet protocol-based network.

 

In another e-mail, sent on Tuesday, the committee informed employees that the firm would introduce a new organizational structure and would reduce salaries for ordinary employees by 30 percent.

 

Managers' salaries will be reduced by 50 percent.

 

CCWBB is a joint venture between CITIC Net, the telecom arm of the Chinese conglomerate the CITIC Group, and the British telecom giant Cable and Wireless plc.

 

The Chinese Government approved the joint venture in December 2004.

 

This firm was the second Sino-foreign link-up in the fixed-line business following the launch of a joint venture between AT&T, Shanghai Telecom and a company under the Shanghai government in 2000.

 

CCWBB's registered capital is US$14 million, according to the company website.

 

Insiders said CITIC Net has a 54 percent stake in the company and mainly supplies telecom equipment.

 

Cable and Wireless owns 42 percent, bought with a cash investment. Company executives own the remaining stock.

 

Cable and Wireless invested US$5 million as a first-phase investment, but a second-phase investment of US$12 million did not materialize, it is believed.

 

Sources said Cable and Wireless may want to lay off a number of employees and could withdraw from the joint venture.

 

Last month, the British firm said it would lay off 3,000 jobs in five years and, earlier this month, there were rumors that it would be bought by Vodafone or France Telecom.

 

When China became a member of the World Trade Organization in 2001, it was required to open the telecoms sector.

 

A number of Sino-foreign joint ventures have been set up and other foreign telecom companies have invested in their Chinese counterparts, but progress has been mostly slow.

 

CITIC Net has its own backbone network, but it has to rely on existing carriers to get access to customers.

 

CCWBB's focus is on business customers, which are controlled by the two dominant fixed-line operators, China Telecom and China Netcom.

 

This means CCWBB has to be both a partner and competitor with Chinese carriers, which often puts it in a difficult situation.

 

Deng Zhicheng, a veteran telecoms industry analyst, said CCWBB mainly operates its services on the Next Generation Network, which is still new in China, so getting customers is not easy.

 

Insiders said CCWBB bought some of its technology from the Chinese equipment giant Huawei, but adapting this has taken time, energy and money.

 

(China Daily March 30, 2006)