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If the number of times a CEO visits any given market is an indication of its importance, then China must be very significant for Australian telecom giant Telstra.

Since Sol Trujillo took over the helm of Telstra in July 2005, he has visited China four times and his visits have paid off.

In August, Telstra acquired a 51 percent stake in Beijing-based real estate portal Soufun.com for US$254 million through its directory and advertising subsidiary Sensis, thus entering the nation's booming Internet market.

Industry sources said the firm is also considering establishing an alliance with China Telecom, the nation's largest fixed-line operator, which operates in much the same fields and has similar plans to boost its broadband, wireless and Internet businesses.

Telstra's ambition in both basic and value-added telecom services in China, as shown from its interest in China Telecom and Soufun, is a typical example of foreign companies' interest in the world's most populous telecom market since the nation joined the World Trade Organization (WTO) five years ago.

"Joining forces with Chinese operators and bringing value is good, but one should not take control," said Igal Brightman, global managing director of technology, media and telecommunications with the consulting giant Deloitte.

According to China's commitment to the WTO, the maximum stake that foreign investors can hold in telecom joint ventures has been lifted from 35 to 49 percent, while they are no longer restricted to 17 large cities.

When China was negotiating its WTO entry, its telecom industry remained in its infancy mobile phones were regarded as a luxury product by most people and they needed to wait for almost one month to have a fixed-line phone installed.

As a result, with their financial and technological strength, foreign operators thought China's WTO membership would give them access to a hugely lucrative market.

Since China's WTO accession in December 2001, Chinese operators have made dramatic progress and spent hundreds of billions of dollars, partly prompted by the activities of international equipment vendors such as Ericsson and Motorola.

China has therefore become a place where global telecom equipment vendors test their best products.

In addition, China's fixed-line subscribers rose by twofold to 370 million and mobile subscribers grew by three times to 450 million.

Now, they have found out it is not wise to build their own networks, with equity investment becoming the dominant form of tapping the benefits of the world's largest market in terms of subscribers.

China Mobile, the world's largest mobile operator, teamed up with Vodafone; China Unicom, a smaller competitor of China Mobile, formed a joint venture with SK Telecom from South Korea; China Unicom, the second-largest fixed-line operator, brought Spanish counterpart Telefonica on board as its largest strategic investor.

The only firm left for foreign investment among the top four operators is China Telecom, which has many large international operators pursuing it, such as Telstra, Japan's NTT and France Telecom.

"China is a very unique market: just like its economy, no other country has gone from having the most primitive communication tools to the most advanced telecom system in the world in such a short period of time," said Charles Yen, managing partner of China northern region with Deloitte.

Yi Mingyu, a senior analyst with CCID Consulting Co Ltd under the Ministry of Information Industry, agreed with Yen and said foreign investors and operators must have a realistic attitude when operating in the Chinese market.

Brightman from Deloitte said that when foreign investors come, they must find areas where they can add value, but Chinese operators are now already very strong and technologically is sophisticated, so the opportunities for foreign participants to have a dominant say are minimal.

One area in which they can offer value and attract Chinese counterparts is their international expertise, as Chinese operators are trying to expand to overseas markets and increase the share of value-added services for higher profits.

That is why Vodafone, Telefonica and SK Telecom have become strategic investors. Vodafone and Telefonica both have strong international businesses in Europe, Asia, and Latin America, while SK Telecom has rich experience in developing value-added services.

Brightman said new opportunities may arise with technological breakthroughs such as the third generation (3G) mobile communication system, which has a higher efficiency and a faster Internet connection speed.

China is expected to issue 3G licences very soon. What services operators bring to consumers will be the key to their success in this business.

Areas like cost efficiency and content on a 3G network may be something that foreign operators and investors should use to attract Chinese operators and consumers.

(China Daily December 15, 2006)