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To: djane who wrote (2785)	2/4/1999 7:17:00 PM
From: djane	Respond to of 29987

China pushes aside telco competition news.com By Reuters Special to CNET News.com February 4, 1999, 3:30 p.m. PT BEIJING--China's information ministry today confirmed plans to break up telecommunications giant China Telecom, but made clear it would not tolerate competition from foreign companies or inexpensive Internet phone providers. Wu Jichuan, the head of the Ministry of Information Industry, outlined plans to split China Telecom into three parts responsible for paging, mobile, and fixed line networks. He gave no timetable, and said the plan needed cabinet approval. Although Wu insisted his 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 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. "There is a big and growing groundswell of opinion that this is unacceptable." One of Wu's top lieutenants at the ministry, Wang Jianzhou, told the news conference 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 $1.4 billion already made by foreign companies such as U.S. long distance carrier Sprint. Dozens of foreign companies 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 revenue 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. Hardliners within the government argue for tight control over telecommunications, including foreign exclusion from the market, on the grounds of national security. The Ministry of Information Industry argues that China Telecom must be allowed to reap large profits so it can develop telecommunications in poor inland areas unable to attract commercial investment. Wu also said China planned to boost the number of mobile phone users to 39.68 million this year from 24.98 million at the end of last year. He said a total of 28.34 million new fixed telephone line users were added last year, bringing the total to 85.02 million. Another 15.1 million users would be added this year. Story Copyright © 1999 Reuters Limited. All rights reserved. Copyright © 1995-99 CNET, Inc. All rights reserved. Privacy policy.