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To: D.B. Cooper who wrote (72660)	5/28/2000 12:05:00 PM
From: D.B. Cooper	Respond to of 152472

Sunday May 28 9:46 AM ET German Firm Guiding $2 Bln Into China Telecoms By Matt Pottinger BEIJING (Reuters) - A Chinese venture controlled by Germany's Siemens AG will shepherd more than $2 billion in foreign capital into China's telecommunications market over the next few years, the head of the venture said. ``We've lined up two large broadband backbone projects,'' said William Krueger, chief executive officer of Xin De Telecom, which is owned 70 percent by Siemens and 30 percent by China's investment arm China International Trust and Investment Corp. ``Investment volume is well over $2 billion over the next three to four years,'' Krueger told Reuters in a recent interview. Speak your mind Discuss this story with other people. [Start a Conversation] (Requires Yahoo! Messenger) The capital -- from a handful of North American telecoms companies and strategic investors -- will be used to help two Chinese operators expand Internet and data networks, he said. He declined to reveal the investors, but said Siemens itself was not participating. By packaging the capital in the form of special leases rather than equity investments, Xin De avoids running afoul of laws that forbid overseas stakes in the telecoms service sector, he said. But the leases could give investors a head start in taking stakes in operators once investment rules are relaxed upon China's expected entry to the World Trade Organization, he said. How It Works Under the model, Xin De collects capital from the foreign investors and uses it to purchase the equipment and services that Chinese operators need. It then leases those goods to the operators in return for payments adjusted to company performance. In other words, the foreign players earn returns just as they would if they were direct investments, except they do not hold actual stock or shareholding rights in the company. The arrangement is not new -- nor is it risk free. Xin De used the same structure to pour $185 million into mobile phone networks in four Chinese cities beginning in 1996. It was forced to negotiate a withdrawal of that capital in March after Beijing summarily ordered the operator, China United Telecommunications, to rid itself of foreign partners. Krueger insisted the system is legal and said Xin De was pleased with its settlement terms with China Unicom. Xin De's mistake in its dealings with China Unicom had been to leave out clauses governing contract termination, he said. Contracts for the new projects have those terms built in. ``We build in, right up front, the terms under which the operators can terminate the arrangement,'' he said. Xin De's activities are licensed by the Ministry of Foreign Trade and Economic Cooperation, he said. Opportunities Under The Wto He declined to say which Chinese operators would benefit from the leases. Xin De was vetting a series of other potential projects for the lease arrangement, including one to upgrade Chinese cable television networks to handle two-way traffic. The projects represent one approach toward tapping the potential opportunities for foreign investors after China becomes a WTO member. China has pledged to phase in minority foreign ownership of mobile and fixed-line operators after WTO accession. Krueger said it was possible Xin De would convert the leases into minority equity investments once Chinese law permitted it. The contracts ``leave room to migrate toward equity under the WTO,'' he said. dailynews.yahoo.com Good Luck Don