The two agreed to link their networks and develop an integrated charging system that will allow customers of one service to call customers of the other service.

According to China Railcom spokesman Dong Binfeng, the deal was the final hurdle before the company begins phone operations in mid-July.

The two companies actually signed a structural agreement on network and charge integration a month ago, but the final signing was postponed until yesterday. The delay was evidence of China Telecom's hesitation to loosen its grip on the nation's phone lines, said sources close to the two companies.

China Railcom proposes to charge local phone call prices that are 10 percent lower than those of China Telecom. Long distance calls will cost 20 per cent less, the company has claimed.

China Telecom presently charges 0.18-0.22 yuan (2-3 US cents) for the first three minutes of a local call and 0.09-0.11 yuan (1-2 US cents) per minute from the fourth minute. It charges 0.07 yuan (less than 1 US cent) per six seconds for long distance calls inside the country.

The new standard was adopted in late March and rapidly met with complaints from customers living in cities, many of whom found their monthly phone bills had risen 20 to 30 per cent.

Although it seems poised to enjoy an advantage in rates, China Railcom recently lost another competitive edge because of government policy.

Last Sunday, the government cancelled installation fees for telephone lines, voiding a China Railcom plan to charge half as much as China Telecom for installations. The move has made things difficult for Railcom as it approaches the launch date for its fixed-line operations. A number of price sensitive customers who originally planned to wait for Railcom before installing a phone decided not to wait after the government's announcement.

The number of new customers China Telecom has attracted since the announcement has been several times higher than average.

(China Daily 07/07/2001)