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To: Brent Gilbertson who wrote (1207)	9/2/1999 5:50:00 PM
From: Brent Gilbertson	Read Replies (1) \| Respond to of 1567

By Matt Pottinger BEIJING, Sept 2 (Reuters) - Chinese regulators have ordered China Unicom, the country's number two telecommunications player, to kill more than 40 "irregular" joint ventures with foreign investors by the end of this month, Unicom said on Thursday. The move is sure to fuel the flames of a bitter dispute between Unicom and more than two dozen foreign firms that have poured $1.4 billion into the company's mobile phone and fixed line networks through an unorthodox joint-venture scheme. The scheme, called China-China-Foreign (CCF) joint ventures, was used to skirt a prohibition on foreign ownership in domestic telecoms operators. Companies including France Telecom <FTE.PA>, Bell Canada <BI.TO>, NEXTEL <NXTL.O> and Sprint <FON.N> set up legal joint ventures with Chinese companies which in turn invested in Unicom. But last year Beijing declared CCF ventures "irregular" and ordered Unicom to unwind the contracts. The Ministry of Information Industry issued a document this week reiterating that the CCF ventures violated government regulations and "must be corrected," China Unicom said in a statement on Thursday. CLEAN-UP The document said Unicom would have to conduct "an appropriate clean-up of all CCF ventures before mid-September or the end of Sepetember at the very latest," according to the statement. Unicom has already frozen or delayed revenue sharing with its joint venture partners, and has offered to buy out some of them for the cost of their initial investment plus roughly 17 percent in interest. But several of the foreign companies have banded together and demanded equity in Unicom or buyout packages that take into account lost potential revenues and the costs of supporting the networks -- figures two or three times the initial investments. Some have also threatened to try to block a planned initial public offering by Unicom in Hong Kong and abroad by complaining to securities watchdogs in their respective countries. Daewoo Corp <03810.KS>, which poured more than $100 million into mobile phone networks in the provinces of Zhejiang and Heilongjiang, notified Unicom last month that it is preparing to seek arbitration. Unicom announced earlier this year that it would seek a US$1.0 billion stock listing this October. But one foreign executive said the battle over CCF had forced Unicom to press the listing date off until next year. At the same time, Unicom was hoping to raise the listing price to $5.0 billion, he said. Yang Xianzu, chairman of Unicom, said the end of CCF contracts would not mean an end to cooperation with foreign companies. "An early resolution of the CCF arrangement will help create the conditions for new coopertations that comply with the government regulations and could avoid unnecessary economic losses," he was quoted in the statement as saying. REUTERS Rtr 11:07 09-02-99 Copyright 1999, Reuters News Service