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China Telecom

High costs stall AT&T mainland expansion

PUBLISHED : Wednesday, 15 March, 2006, 12:00am
UPDATED : Wednesday, 15 March, 2006, 12:00am

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AT&T will still invest part of its global US$8.5 billion investment budget in China, but says the country's slow progress in opening up its telecommunications sector has made the company unwilling to enter the basic services segment.


Steve Lowe, vice-president for Asia Pacific of AT&T, yesterday said high entry costs deterred the firm from expanding further into China's basic telecommunications services segment, despite its 25 per cent stake in Shanghai Symphony Telecommunications, a value-added services joint venture with China Telecom.


'We talk regularly with the government and the Ministry of Information Industry about speeding up the liberalisation of its telecoms sector, which does not allow for majority foreign ownership [exceeding] 49 per cent,' he said.


Thus far, these talks had yielded little progress and Mr Lowe said the US$250 million fee demanded for a basic telecommunications services licence was too costly for just a 49 per cent minority stake.


As part of its World Trade Organisation commitment, China is required to raise the foreign investment ceiling on mobile voice and data basic telecommunication services to 49 per cent from December 2004, the third year after its 2001 accession to the trade body.


Foreign investors can also own up to 25 per cent of joint ventures offering basic services such as voice and fax in Beijing, Guangzhou and Shanghai.


Shanghai Symphony, which offers remote access and internet services for more than 200 clients, was set up in 1999 as the first foreign telecommunications service provider approved to invest in a Sino-foreign joint venture. Its operations are limited to Pudong.


Mr Lowe believed that since then, Beijing had not approved the entry of other foreign telecommunications firms but AT&T would continue to invest in the market to ensure growth.


Shanghai Symphony, co-owned by China Telecom Shanghai branch with 60 per cent and Shanghai Information Investments with 15 per cent, posted a 45 per cent growth in revenue and operating profit before amortisation and depreciation charges last year.


Mr Lowe said AT&T was talking to China Netcom about possible co-operation opportunities for the 2008 Beijing Olympics. Netcom is the games' exclusive fixed-line telecommunications partner.


Meanwhile, Mr Lowe said the US telecommunications giant this year would invest US$4 million in four new network nodes in Malaysia, India, Vietnam and Pakistan.


Back home, AT&T has just announced that it would buy US telecommunications firm Bellsouth in a US$67 billion deal.


Mr Lowe said the deal would allow the US telephone giant to wholly control Cingular Wireless, the leading mobile operator co-owned by Bellsouth, which holds 40 per cent.


The deal is pending various regulatory approvals which Mr Lowe said would take eight to 12 months.