CCT Telecom said a deal announced yesterday with a company backed by the mainland Ministry of Electronic Industry signals its desire to move from equipment manufacturing into the provision of telecommunication services in China. The company has created a joint venture called CCT China with Tesonic International, 40 per cent owned by the Ministry through its subsidiary, the China National Electronics Import and Export Corporation. CCT Telecom chairman Clement Mak Shui-tong said the company's new shareholder, Xinhua (the New China News Agency), was instrumental in bringing together the two parties. Last month Xinhua took a 12 per cent stake in CCT Telecom, its first investment in a Hong Kong listed firm. 'Xinhua is our strategic shareholder which introduced a good partner to CCT Telecom,' Mr Mak said. CCT managing director Bankee Kwan said: 'In the absence of rating agencies in China, Xinhua helps us get background on a company so we can see its track record.' Under the deal, CCT China will provide financing and expertise to three joint ventures, with an emphasis on the satellite communication market. Tesonic has one of six commercial government-issued Very Small Aperture Terminal (VSAT) licences. VSAT allows voice, data and video signals to be sent point-to-point via satellite. Tesonic Chairman Lu chang-Hong said the potential of the business was huge as it was much cheaper than installing lines across the country. 'After 10 years the VSAT market is forecast to be around 20,000 two-way sites. We are looking at gross profit margins of 30-40 per cent,' he said. Mr Kwan said CCT Telecom wanted to move into the service side of the industry because manufacturing was a highly competitive business in which volumes had to be high and yields were low. 'In the service provision area the volume is low but the yield high. It will be our direction in the future,' he said.
