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Telecom industry reorganization

(China Daily)
Updated: 2008-07-07 17:12

China's reorganization of its telecom industry opens the door for foreign companies to the world's largest telecom market, but the floodgate could be kept shut for now.

The world's biggest industrial overhaul has removed some uncertainty that had kept strategic investors at bay, and China's telecom operators are certainly hungry for more capital, technical expertise and marketing skill.

"There's never been a better time for foreigners to get into the industry," says Daiwa Institute of Research's Marvin Lo. "And on the Chinese side, they want the capital and know-how that global firms will bring to the table."

At present, foreign telecom operators, such as Britain's Vodafone Group Plc and Spain's Telefonica SA, are confined to tiny stakes in the largest operators.

The restructuring, announced in May, is aimed at boosting competition between operators, and could trigger billions of dollars of orders for equipment makers like Ericsson, Nokia Siemens Networks, Nortel and Motorola Inc.

Foreign companies, many of which face slowing growth at home, are already lining up.

Qualcomm, SK Telecom and Singapore Telecom are courting China Teleccom, the larger of China's two fixed-line players, in the hope an investment will cement future cooperation, media reports say.

Telefonica, which owns 7.2 percent of China Netcom, is reportedly interested in buying 10 percent of wireless operator China Unicom.

Analysts say Verizon Communications Inc, AT&T, KDDI and Softbank are also likely to be keen on China, home to nearly 600 million mobile users.

But they warn it would take a long time for Beijing to alter its policy of preventing significant foreign influence in strategic sectors. Meanwhile, Chinese carriers will be preoccupied initially with dealing with the reshuffle.

"Foreign investors can do little in China's telecom industry except be financial investors. This will remain the case for at least a short while," says Allan Ng, analyst at Bank of China International.

Getting into the best position for future opportunities in China's telecom sector should be foreign companies' immediate concern, Ng says, adding it was difficult to estimate the market's potential before Beijing clarifies its stance on foreign investment.

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