Hope for China telecoms bidders
By James Kynge and Dan Roberts in Beijing
Published: September 12 2000 21:16GMT | Last Updated: September 12 2000 22:52GMT
Multinational telecommunications companies hoping for licences to operate in the huge Chinese market have been given new hope with an apparent climbdown by China's telecoms ministry.
Wu Jichuan, China's telecommunications minister, has denied that the government intends to restrict telecoms services licences to those few foreign companies that generate more than $10bn in annual revenues.
"I do not know where you got this information. There is no such plan," Mr Wu said in an interview.
The stipulation that foreign companies must have made revenues of $10bn for two consecutive years before applying for an operating licence was contained in draft telecoms regulations submitted by Mr Wu's ministry of information industry (MII) to the state council (cabinet). Industry analysts said his disavowal of the $10bn threshold might mean that the state council had raised objections and the figure had been dropped.
The MII is famous in China for its reluctance to allow foreign competition into the domestic marketplace, whereas the state council has been more open to the idea of competition.
China has pledged as part of its accession to the World Trade Organisation, expected this year or early next, to allow 49 per cent foreign investment telecoms services joint ventures. But the Chinese government will retain the authority to grant or withhold licences even after WTO accession.
The conditions that they attach to the award of licences are therefore of keen interest to foreign multinationals hoping to break into the world's second largest telecoms market.
The telecoms law, whenever it is finally adopted, will contain rules and restrictions on foreign participation, Mr Wu said. But he suggested that these would not grade companies by the size of their revenue but by the investment commitment they were ready to make to China.
"After we enter the WTO the market will be open and companies will be equal. As for the amount of investment, there will be some regulations and things will be on a mutually beneficial basis," Mr Wu said.
The minister derided auctions in the UK, Germany and Korea for third-generation telecoms licences, reinforcing the belief among analysts that China is unlikely to hold an open auction.
"I don't want to see a bubble emerging from the advent of the 3G," Mr Wu said. "There is no set standard or business at the moment. How many years will it take those companies [that won 3G auctions] to recover their initial investment of, say, dozens of billions of US dollars or $40bn in the case of [the German auction]?"
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