China Telecom

China telecoms show few signs of opening up

PUBLISHED : Friday, 31 January, 1997, 12:00am
UPDATED : Friday, 31 January, 1997, 12:00am

The mainland telecom market still shows few signs of opening to direct investment by foreign companies, according to a leading Hong Kong authority.

Hong Kong University Telecom Research Project director John Ure said he believed 'patience remained the name of the game'.

'There are no strong forces at the moment for a rapid opening up,' he told a meeting of telecom industry professionals yesterday.

Chinese law does not permit foreign investors to take equity stakes in mainland phone companies or manage the networks.

Despite this, many of the world's largest telecom companies continue to maintain a presence in China.

Some are being paid as consultants for helping construct and manage Chinese networks, while others are being paid for the equipment they provide.

Mr Ure said it was a fallacy that China needed foreign capital to finance the development of its telecom infrastructure, despite what he labelled 'the largest telecom build-out in history'.

The Ministry of Posts and Telecommunications (MPT) is the main regulator, policy-maker and operator in China. Its networks are grouped under the name China Telecom, by far the dominant phone company in the country.

Mr Ure said his work suggested its sources of financing were 76 per cent internally generated, with 17 per cent drawn from foreign government loans and investment.

With this financing structure, China had managed to install 100 million fixed lines to date, showing it had no great need for outside finance.

By 2000, China plans to have 123 million lines and an exchange capacity of 170 million.

The MPT is the largest revenue contributor to the State Council and therefore it is little surprise Beijing is reluctant to let foreign firms erode that position by taking equity stakes.

China's second-largest Telecom company Unicom - run by an opposing set of Beijing ministries - is in a different position. It is desperate for cash but has been severely hampered by its difficult relationship with the MPT.

'It lacks direction, has suffered several changes of management, battles with bureaucracy from other departments and has no business plan,' Mr Ure said. 'If Beijing wants it to continue, it will.' A recent report seemed to hint Beijing's hard line on foreign investment was softening. The China Daily newspaper reported foreign companies would be allowed to invest in certain add-on services, such as electronic and voice mail, and value-added fax services. Mr Ure said he was sceptical that a change was really occurring.

CROSSED LINES China Daily reports foreign companies will be allowed to invest in add-on phone services Official report dismissed as a concessionary ploy by Beijing to restate its WTO entry bid