Beijing is accelerating a plan to break up state-owned China Telecom to boost competition, the China Daily Business Weekly reported Sunday. The report hinted the move may eventually open the door to foreign companies.
"With no hope of building a true competitor to China Telecom at home, and an unwillingness to invite foreign companies to enter the market at present, the government is left with only one choice: reforming China Telecom," the newspaper said.
Quoting an unnamed official with China's Ministry of Information Industry, the report said the restructuring plan was being stepped up since earlier schemes had failed to win the approval of the State Council, China's cabinet.
The ministry official gave no details of the overhaul, but the report said China Telecom could be divided along geographic or business lines.
China Unicom, a rival carrier launched in 1994, had not developed as had been hoped, the newspaper reported, citing China Telecom's overwhelming monopoly strength as the reason.
Beijing has poured cold water on foreign investors' hopes for a piece of China's rapidly growing telecommunications market.
"The emergence of opportunities [for foreign companies] is likely to be tied to China's efforts to accede to the World Trade Organization," the newspaper cautioned.
Officials began hinting in September that Beijing would shut the door on a special kind of joint venture that enabled foreign firms to participate in the telecom industry alongside China Unicom. It had allowed foreign companies to form joint ventures to invest in infrastructure in which China Unicom operated the networks and the joint ventures received "consulting fees" in return.
On 4 November, the official People's Daily reported the government had ordered Chinese telecoms to buy domestic equipment to support the fledgling industry.
Chinese firms are working on locally made mobile phones and are set to break what the Daily called a "monopoly" of foreign companies.
GSM is the world's most widely deployed digital wireless communications standard. State media have said 15 domestic firms and joint ventures in China can produce GSM equipment.
On 20 November, Wang Jianzhou of the Ministry of Information Industry said Beijing would not approve any new foreign joint ventures to make GSM mobile telecoms or terminal equipment.
Wang, head of the general and planning department of the ministry, told an investors' seminar that existing joint ventures already had excess capacity while domestic firms had begun producing equipment that met official quality standards.
Foreign manufacturers have said a glut had developed in the market for paging equipment and other devices as new factories came on line and China's economy slowed.
Copyright© 1998 Reuters Limited.
