ANALYSIS-Cracking China telecoms market won't be easy
By Matt Pottinger
BEIJING, May 25 (Reuters) - Access to China's booming telecommunications market -- a key concession in Beijing's bid to join the World Trade Organisation -- will come neither quickly nor easily, executives and analysts cautioned on Thursday.
The U.S. House of Representatives approved permananent normal trade ties with China on Wednesday, smoothing the way for Chinese entry to the World Trade Organisation.
But murkiness about how China will implement its market opening pledges, and a history of bad blood between foreign companies and government regulators, mean commerical opportunities could take years to materialise.
The mobile sector, in particular, will be tough to crack, the analysts said.
"Things are not going to move that fast," said Rohit Sobti, telecoms analyst at Salomon Smith Barney in Hong Kong. "I'd be looking at staying out of China for another three years."
PROMISES MADE
In separate agreements with the United States and the European Union, Beijing has pledged to allow 25 percent foreign stakes in mobile companies upon WTO accession, rising to 49 percent after three years.
Foreign firms will be permitted 30 percent stakes in Internet, paging and other value-added service firms immediately, rising to 49 percent after one year of WTO membership and to 50 percent after two years.
Fixed-line and long distance service would be opened the slowest, with 25 percent stakes allowed after three years and 49 percent after six years.
The problem in the mobile sector will not be the investment cap in each firm, but rather a lack of companies in which to invest, according to industry analysts.
"Are they going to give out new licenses? That's what is important," said Sobti.
The market is dominated by two carriers -- state giant China Mobile Communications Corp, and newer entrant China United Telecommunications.
So far, neither has shown any indication it would welcome foreign players to grab meaty stakes in their networks.
China Mobile has already raised funds through its listed unit China Telecom Hong Kong.
China Unicom just went through a protracted legal battle to rid itself of foreign partners.
BAD BLOOD
Furthermore, the Ministry of Information Industry (MII), which until this year held a controlling stake in former monopoly player China Telecom, has a history of parrying foreign entry into the sector -- even against the orders of top leaders.
Just days after San Diego-based Qualcomm Inc reached a deal paving the way for China Unicom to role out a national network using its CDMA mobile technology, the MII suspended the plan, citing vague bureaucratic procedures.
That was in February, and despite pledges by Premier Zhu Rongji, the MII has yet to end the suspension, dimming chances China Unicom would ever adopt CDMA and cancelling sales opportunities for Lucent Technologies and Motorola.
"Things are beginning to look up, but it's unclear whether or not we're going to end up encountering all kinds of glass walls -- you can see it, but you can't get to it," said Eric Lin, chief representative for Dallas-based GTE Corp.
"I don't think we're going to rush back into this," he said from his office, which, like most foreign telecoms firms, maintains only a skeletal staff in China.
HOPE IN THE INTERNET
Analysts were more optimistic about opportunities for investment in the Internet, though rules there also remain murky.
To skirt a ban on investment in Internet content providers (ICPs) Foreign companies have been forced to adopt convoluted structures that leave Web sites in the hands of wholly Chinese owned companies.
With limited investments allowed, foreign investors might be able to take back stakes in the Web sites they helped create.
"WTO is definitely going to create a positive atmosphere for China to move forwared on the ICP area," said Chauncey Shey, managing partner of Softbank China Venture Capital, which has $200 million in Chinese Internet investments.
"We're pacing ourselves. I'm not sure if because of WTO we're going to speed up or slow down -- we'll take a look when rules come out," he said.
07:16 05-25-00
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