News Archive

China Telecom restructuring not at broadband speed
2002/02/05

Beijing - The delayed restructuring of China Telecommunications Corp. has caused a slowdown in business for foreign telecom companies dealing in China according to the Wall Street Journal on Tuesday.

The drop in the global telecom market has hit the biggest industry players such as Lucent Technologies, Nortel Networks and Cisco Systems in equipment sales. All have come to rely a great deal on the Chinese market which is second in size after the US for many involved, the paper wrote.

The discussions on the split up of the fixed line monopoly of China Telecom into two competing firms started last year. But state maneuverings have slowed down the process.

The company will be divided into a northern and southern operator competing on national level. Both companies can enter each others territory and offer all services from local and long distance calls to data communications and eventually mobile-phone services. Each company will own the local phone networks in the area but ownership of the fiber-optic network connecting provincial networks into a national grid will be split with 70 percent owned by the southern company and 30 percent by the northern company according to the paper.

The details preventing a closure in the deal concern the splitting up of the fiber-optic network that lies across the country.

The indecision has left China Telecom - and the other carriers involved - powerless, stalling purchasing and business decisions and a planned stock offering originally estimated at $6 billion the paper stated.

The slowdown in restructuring is not only hitting equipment sales but also China Telecoms willingness to contemplate new projects, just when foreign investors are eager to explore the market after China joined the WTO.

"Until the shakedown is finished, Chinese Telecom companies are not in a position to talk about new partnerships and alliances," said AT&T China president Art Kobler.

The details of dividing up the network combined with the uncertainty over job assignments have left Chinese telecom executives unwilling to make major investments. Last year China Telecom cut its budget for network expansion from an originally planned $12 billion to $9 billion according to estimates by Lehman Brothers in Hong Kong.
Lehman estimates that China's total investment in new phone networks will be down 8 percent this year the first decline in years.

Please close this window to go back