CHINA yesterday formally launched a second telecommunications operator, Liantong Communications Co, effectively ending the lucrative decades-old monopoly of the Ministry of Posts and Telecommunications. Liantong has the backing of the ministries of electronics industry, power industry and railways and will initially provide local and long-distance telephone services and cordless telecommunications services in urban areas not adequately served by the existing network. It also counts among its shareholders the China International Trust and Investment Corp, the China Resources group, the China Merchants Holdings group, and the China Everbright International Trust and Investment Corp. These four powerful giants have each established a strong network in Hong Kong as pillars of China's corporate and economic presence in the territory. Set up after a fierce two-year battle to break the ministry's monopoly, Liantong already has about 80 major foreign telecommunications operators knocking on its doors and is hoping to sign deals with a player that has powerful political connections. China does not allow foreign companies to operate telecommunications networks, although they may invest in plants to manufacture telephone parts and telecommunications components. Some analysts, however, believe that by liberalising the industry with the creation of Liantong, China could pave the way for foreign equity participation in the service sector. Liantong has registered capital of one billion yuan (about HK$893 million), with the three constituent ministries accounting for 100 million yuan each and the other shareholders 80 million yuan each. Sitting at the helm of Liantong is Zhao Weichen, a former deputy director of the State Economic and Trade Commission, who will oversee the company's plans to invest 100 billion yuan over the next five years to improve the capacity of more than 30 networks and offer long-distance telephone services to the public. The 30 networks were previously intended for the use of Liantong's three constituent ministries and the armed forces. In an announcement in yesterday's People's Daily, Liantong said it would also set up mobile, satellite and computer-integrated telecommunications networks. It also aims to provide 10 per cent of the country's long-distance telephone calls and 30 per cent of its mobile telecommunications capacity and to establish international links by the end of the decade. Vice-Premier Zou Jiahua was quoted by the China News Service as saying at the company's launch yesterday that Liantong's establishment marked a crucial step in the reform of the country's telecommunications infrastructure. He said the company must clearly define the rights of property ownership within its constituent parts and must separate management and ownership. Liantong's launch comes as China desperately tries to beef up its telecommunications infrastructure to cope with the demands of its rapidly growing economy. In May, the country announced that it would develop one of the world's three largest telecommunications networks by the end of the century, with the setting up of a second network. The network involves the laying of 16 trunk optical cables to give every provincial capital access to the world network and trebling the number of telephone lines in an overhaul costing 360 billion yuan. The plans also call for an increase in the national telephone capacity from 42 million lines to 140 million lines by 2000. Under the plans the country's telephone availability rate would reach eight per cent of the population, and between 30 and 40 per cent of the population in major cities. Only about two per cent of China's 1.2 billion people have personal telephone lines with most telephone owners living in urban areas.