Alcatel, backed by an ambitious research and development (R&D) program, is looking to lead the mainland market for networking and communications infrastructure gear as the country pursues key economic reforms under the World Trade Organisation (WTO). 'Our recent investments position us well in post-WTO China and lead us closer to our goal of making the Asia-Pacific the strategic centre of Alcatel's worldwide business,' said Dominique de Boisseson, chairman and chief executive of Alcatel's China operations. These investments include the creation of Alcatel Shanghai Bell (ASB) at a cost of US$312 million and the establishment of an advanced infrastructure (AI) lab with partners. 'ASB will become one of Alcatel's major global R&D centres, while the AI lab provides an environment for testing the data service technologies for 2G, 2.5G and soon 3G wireless platforms,' Mr de Boisseson said. Core technologies to be developed by ASB for domestic and global markets include next-generation fixed and mobile networks. The French telecommunications giant expects ASB to achieve sales of more than US$2 billion in its first year of operation. Together with partners Intrinsic Technology and WiderThan .com, Alcatel created the AI lab to provide a live, multi-infrastructure home for the development of mobile data services. 'Alcatel expects these R&D facilities to substantially contribute to our long-term business performance,' Mr de Boisseson said. He said Alcatel had been investing heavily in China since 1983. These investments have resulted in 17 joint ventures and wholly owned companies, including six R&D centres, and a full-scope coverage of business activities spanning air, land and sea. 'With our increased strength in R&D, Alcatel will become an essential supplier to all major China telecommunications operators,' Mr de Boisseson said. These investments came as China joined the WTO after 15 years of negotiations. Lucille Barale, Hong Kong-based partner at international law and advisory firm Freshfields Bruckhaus Deringer, said: 'While no single change may itself attract headline coverage, the programme for reform in trade, services and investment will alter the landscape for doing business in China as we know it.' China now is subject to certain investment conditions and must comply with the WTO's Trade-Related Investment Measures Agreement, which ensures protection of intellectual property and information technology. With ASB, Alcatel will become the first international telecommunications equipment supplier to consolidate its businesses in the mainland in a single company. Alcatel also was the first international company to establish a Chinese company limited by shares in the telecommunications sector. This legal structure gives ASB the flexibility to be listed in China in the future. Alcatel will hold 50 per cent plus one share in ASB, with certain mainland entities taking the remainder. Aside from offering Alcatel's portfolio of products to Chinese operators, ASB will more than double the number of R&D engineers now in Alcatel China, Shanghai Bell and Shanghai Bell Alcatel Mobile Communication combined, giving the new company 3,500 engineers in three years' time. The establishment of ASB is subject to the approval of relevant mainland authorities. Once approved, ASB will integrate the operations of Alcatel China, Shanghai Bell and Shanghai Bell Alcatel Mobile Communication. All of Alcatel's other telecommunications subsidiaries in China will be integrated into ASB within 24 months of its establishment. Alcatel also has committed to helping mainland authorities plan, build and deploy a high-speed, digital platform for the 2008 summer Olympic Games. 'In 2008, Beijing will have the best communications infrastructure in the world,' Mr de Boisseson said. He added that the city government was poised to accelerate its infrastructure development plans to meet the demands of hosting such a big event. Beijing officials recently announced a US$20 billion programme to modernise its facilities in time for the Games. Mr de Boisseson said Alcatel had already started talks with the authorities on how the company could help the city government to use the latest technological innovations in the Games. The explosive increase in Internet users in China, from 8.9 million in 1999 to 22.5 million last year, had created demand for high-speed access and broadband services, such as video-on-demand, multimedia distance learning, tele-working and video conferencing. Mr de Boisseson said these infrastructure developments should pay off for the mainland as the country developed a nationwide digital backbone to support the Games and a more open economic market in the near future.