MAinland China to grow from 45MM wireless subscribers now to 70MM by year end. AT&T to participate on model joint venture.
JohnG
scmp.com
Published on Tuesday, May 30, 2000
TELECOMS
AT&T to make
inroads
BIEN PEREZ
AT&T is poised to become the first
foreign company to provide direct
communications services in the mainland
based on a proposed joint venture in
Shanghai.
A senior AT&T official confirmed that the
landmark deal was "nearing completion"
and that it could be a model for future joint
ventures in the country, under the
open-market rules of the World Trade
Organisation (WTO).
"We're hoping to get approval soon and
sign the contract," Arthur Kobler,
president of AT&T China, told
Technology Post.
AT&T expects to launch Internet Protocol
(IP) based broadband network services in
Shanghai's Pudong area by the end of the
year, or early next year.
Partners in the venture will be Shanghai
Telecom, a subsidiary of national
communications carrier China Telecom,
and Shanghai Information Investment (SII),
the city government's private investment
arm.
Negotiations for the joint venture followed
the signing of a "framework agreement"
late last year between AT&T, Shanghai
Post and Telecommunications
Administration and SII. This agreement
called on the three companies to work on a
feasibility study for a joint venture to
provide IP-based broadband
communications services in Pudong, a
core economic zone.
Using Shanghai Telecom's embedded
communications infrastructure, including
fibre optics to various buildings in
Pudong, AT&T planned to add a layer of
IP-broadband capabilities so that
businesses in the area could get connected
to their global networks, Mr Kobler said.
IP-based broadband represents high-speed
data communications using the Internet,
which works across disparate networks
and different kinds of computer platforms.
Shanghai Telecom mainly provides local
and long-distance calls, telegraphs and
faxes, and data and video transmission
services.
Mr Kobler said there was significant
communications infrastructure in Pudong,
but customers wanted a network where the
service provider guaranteed service
quality and minimum repair time. The
provider would be penalised if it failed to
make good on those guarantees.
"These are the kinds of service-quality
agreements that we have signed around the
world with our customers," said Mr
Kobler.
He said AT&T's investment in the Pudong
joint venture would be "modest".
To Chee-eng, a senior analyst at
GartnerGroup, said AT&T's proposed
Shanghai venture was important because it
was a high-profile project.
He said other foreign companies would
monitor the project and watch to see if
there was scope for more co-operation.
Under recent liberalised agreements, the
provision of value-added communications
services - like those AT&T's Pudong
venture will offer - will open up in
Beijing, Shanghai and Guangzhou when the
mainland enters the WTO.
"I imagine that every one of our
competitors - whether they're from Japan,
Europe or America - are talking to
potential Chinese partners about joint
ventures. I think it's no secret what the
opportunities are in the marketplace," Mr
Kobler said.
"As the WTO comes into effect, our
objective would be to expand this venture
beyond Pudong and move to other key
cities."
Those future AT&T projects are likely to
involve wireless communications
services.
"Foreign companies will be able to,
perhaps as early as next year, begin
investing in the wireless market, starting
with a 25 per cent equity ceiling, in
Beijing, Shanghai and Guangzhou," Mr
Kobler said.
In the second year of operations, that
foreign equity ceiling will be raised to 35
per cent and cover services in 14 cities. In
the third year, the ceiling will be 49 per
cent with no geographical boundaries. In
the fifth year, all restrictions on foreign
equity and location will be removed.
He said AT&T was looking at
"incremental growth in the China market of
about US$50 billion between 1999 and
2004. Perhaps half of that will be
wireless".
Mr Kobler estimated the mainland's
wireless subscriber base would grow to
as many as 70 million users by the end of
the year from about 45 million now.
"China will be the second-largest wireless
market in the world after the US and
growth will continue at 30 to 40 per cent a
year for the indefinite future." |
