Pressure grows to open up telecoms

PRESSURE is mounting on China to scrap its ban on foreign investment in the telecommunications industry as provinces and cities clamour for money to develop telephone systems, say analysts.

Opinions are divided on how quickly Beijing will open up the industry to foreign companies, but some analysts said an end to the ban could be less than six months away.

Yesterday, Shanghai officials said they wanted foreign investors to operate part of the city's communications network.

''We would like to designate a place to experiment with more international participation in the telephone network,'' said mayor Huang Ju during a visit to New York.

Telecommunications analysts in Hong Kong said the Shanghai plan might be a key turning point in the argument over whether China should allow foreign investment in its telecommunications industry.

''This is extremely important, this is the first big crack in the wall preventing foreign investment,'' said Andrew Harrington, regional telecommunications analyst with Salomon Brothers in Hong Kong.

''Shanghai is a very progressive city and they realise what most people in the world realise, that you can't develop a phone system as rapidly as they want without foreign investment,'' he said.

China's Ministry of Posts and Telecommunications (MPT) has issued at least three public warnings in the past six months reaffirming the prohibition on foreigners becoming involved in the management of, or taking equity in, telecommunications business.

The authorities also recently introduced new curbs on the allocation of radio frequencies, have ordered all owners of cordless telephones, pagers and similar equipment to register them and have announced a clampdown on the use of satellite dishes.

However, some regional authorities appear to have ignored the directives and at least one venture involving foreign investment has gone ahead.

''The MPT doesn't have much control over what happens in the provinces, as is the case with so many industries in China,'' said Hazel Moore, an analyst at WI Carr (Far East).

Hong Kong telecoms firm Champion Technology Holdings has taken a 40 per cent stake in a cellular telephone venture in Chengdu, Sichuan province.

That cellular telephone system might be launched by the end of the year, Champion chairman and chief executive Paul Kan Man-lok said yesterday.

He said the venture conformed with China's telecommunications law.

However, the company is trying to keep the project out of the limelight, barely mentioning it in a long statement accompanying the group's results published yesterday.

The MPT justifies monopoly state control by saying it is a matter of sovereignty that the telecommunications industry remains in Chinese hands.

However, Mr Harrington said the ministry was fighting a losing battle and China's ban on foreign investment could be lifted within six months.

Others were not so optimistic.

''It would be presumptuous to think that they would be willing to break down the barriers to foreign investment instead of just falling short of their goals for telecommunications development,'' said Fred Bowers, telecommunications analyst at Nomura Research Institute in Hong Kong.

Analysts said it was clear that China would have to bring in foreign expertise and money to meet its target of increasing the number of telephone lines to 100 million by the end of the decade from 25 million now.

Japan's Mainichi newspaper reported that the Ministry of Posts and Telecommunications planned to offer China loans in exchange for deregulation of its telecommunications market, in a way that would favour Japanese companies.