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To: Jan Crawley who wrote (52648)	4/26/1999 9:23:00 AM
From: Glenn D. Rudolph	Respond to of 164684

Net phone pioneer VocalTec gets China contract By Simon Hirschfeld NEW YORK, April 26 (Reuters) - VocalTec Communications Ltd. <VOCL.O>, a pioneer in the field of Internet telephone systems, may have an early lead on the biggest telecommunications market of the future -- the People's Republic of China. China Telecom, a giant formerly state-run monopoly that still has about 95 percent of the market, has chosen VocalTec to provide a package of software and services for a 14-city trial of Internet technology-based phone service. The contract, though already agreed upon, will be formally announced at a ceremony Monday in Beijing attended by an Israeli delegation including President Ezer Weizman and top Chinese officials. "China probably has more potential for growth than any place on earth," VocalTec Chairman Elon Ganor told Reuters in a telephone interview from the company's headquarters in Herzliya, Israel. With 1.2 billion people, China has more telephone lines than any country except the United States, and at its current growth rate will soon have more. There are currently about 100 phones for every 1,000 people in China, Ganor said, compared with 200 to 300 per 1,000 in the Western world. Cost and speed were extremely important to China Telecom in rolling out new service, he added. Internet phone technology, besides being better suited to accommodate the massive influx of data transmissions that is rapidly overtaking voice, is also cheaper and faster to deploy. Based on the results of the trial, China Telecom will decide whether, or to what extent, to continue building its network using Internet technology as the backbone. The current trial-stage contract is important, but not dramatic, for VocalTec, Ganor said. He declined to specify the exact terms of the deal. "It could later become very significant moving forward, knowing the growth potential of the market and the kind of relationship that is being developed," Ganor said. As part of the deal, VocalTec will open an office in Beijing. As long as China Telecom were to continue using VocalTec technology, the company would remain in China to help manage the network. VocalTec earned the initial contract despite competition from some heavy-hitters in telecom equipment. "Part of the reason we're so proud is that we beat some of the major players in the area of (Internet) telephony," Ganor said. Although VocalTec in 1995 released the first software sold for PC users to transmit voice over the Internet, industry giants with vast resources like Cisco Systems Inc. <CSCO.O> and Lucent Technologies Inc. <LU.N> now offer competing software and services. Despite its relatively small size, in late 1997 German telecommunications giant Deutsche Telekom AG <DTEG.F> gave VocalTec a vote of confidence by taking a 21 percent stake. VocalTec shares closed at $10.0625, up 62.5 cents, Friday on the Nasdaq stock market, off their 52-week high of $19.