Ameritech quits China telecoms business

PUBLISHED : Monday, 11 August, 1997, 12:00am
UPDATED : Monday, 11 August, 1997, 12:00am

US regional phone company Ameritech is winding up its mainland operations, becoming the first foreign telecom company to leave the Chinese telecoms market.

Ameritech is in the process of closing its office in Beijing and is releasing its staff there.

The decision underlines the difficulty overseas firms face operating in the mainland telecom market, which despite hints of liberalisation remains mostly closed to foreign operators.

However, Ameritech's decision to quit China is said to have more to do with problems in its home market in the US than lack of progress on the mainland.

Changes to US telecoms legislation mean for the first time the company is having to fight competition in its regional market of the US mid-west.

It is understood also that changes in higher management have led to a reassessment of the company's international strategy.

Sources close to the company said it had spent in excess of US$1 million in setting up its representative office in China, hiring staff and advertising.

It had signed a deal with China's fledgling second national operator, China Unicom, for a GSM cellular project at Taiyuan in Shanxi province.

It is understood the company had not put any cash into the project when the decision to leave China was made.

Ameritech is not the only company to enter the Chinese market with great fanfare only to find conditions tough. Bell South - another US regional operator - has scaled down its operations considerably.

Despite the fact it is likely no foreign operator is making any money in China, they are generally reluctant to leave the market because of the huge potential they see for the future if the market is liberalised.

Last year, about 20 million new telephone lines were installed in China.

In its home market in the US states of Illinois, Indiana, Michigan, Ohio and Wisconsin, Ameritech itself has a total of 19 million lines.

Current telecoms policy on the mainland is that foreigners can neither own equity in telecoms ventures nor have operational control, although most companies are adopting a wait and see approach, believing it better to be involved than not.

US analysts in Beijing said that while this waiting approach was fine for European companies such as Deutsche Telekom and France Telecom, which could afford to look to a five to seven year timescale before seeing a return on their investments, shareholder pressure on US companies forced them to take a much more short-term approach.

They suggested Ameritech's decision could have been driven by frustration that an early return on investments would probably not materialise.