To: tero kuittinen who wrote (22476 ) 2/4/1999 1:44:00 PM From: Ruffian Respond to of 152472
China> China's Odd Telecom Reform Reuters 7:40 a.m. 4.Feb.99.PST BEIJING -- The Chinese government is trying to open up the world's fastest-growing telecommunications market to competition, but the old dog is having a hard time pulling off such a new trick. Chinese officials on Thursday confirmed plans to break up the monopoly China Telecom, but made clear it would not tolerate competition from foreign companies or cheap Internet phone providers. That could be bad news for companies that have already poured billions into the market, and for home-grown entrepreneurs. Wu Jichuan, the head of the Ministry of Information Industry, outlined plans to split China Telecom into three parts: paging, mobile, and fixed-line networks. He gave no timetable, and said the plan needed cabinet approval. Although Wu insisted his super-ministry wanted greater competition in the world's fastest-growing telecommunications market, he offered little encouragement to frustrated Chinese telephone users fed up with China Telecom's poor service and high prices. "We should not only provide the conditions for fair access and competition among operators but also protection for consumer rights," he told a news conference. Prices would be lowered, Wu said, but he offered no details. Foreign industry analysts were unimpressed. "We're going from one monopoly to three monopolies," said Duncan Clark, the head of BDA China, a consultancy firm. "Is that really progress?" One of Wu's top lieutenants at the ministry, Wang Jianzhou, told the news conference that China had shut a loophole that enabled foreign companies to skirt a ban on overseas investment in telecommunications networks. No further foreign investments would be approved, he said. Wang gave no indication on how Beijing would handle investments worth US$1.4 billion already made by foreign companies such as US long-distance carrier Sprint (FON). Dozens of foreign companies had entered the market under an innovative licensing, leasing, and consultancy arrangement with state-owned China Unicom, the struggling cash-starved competitor to China Telecom. "Since this kind of financing is irregular, we will no longer adopt this kind of financing," Wang said. But he was vague on how authorities would handle existing investments, saying only "we will put forward opinions suitable to the practical situation." Another official, Zhang Chunjiang, warned of a crackdown on Internet telephone providers that he said were robbing the state of revenues worth hundreds of millions of dollars. This was despite a landmark court ruling this month in favor of two entrepreneur brothers in southern China who used the Internet to challenge China Telecom by offering half-price international calls. "Some unlawful domestic operators are colluding with some overseas companies, and this has seriously eroded revenues of our country from international telecommunications," he said. Zhang said the government would control the Internet telephone market by licensing providers this year. Wu was formerly head of China Telecom and is portrayed by his domestic and foreign critics as a hawkish advocate of the company's continued existence as a near-monopoly. Hard-liners within the government argue for tight control over telecommunications, including foreign exclusion from the market, on the grounds of national security. Copyright© 1999 Reuters Limited.