Tue, Dec 14, 2004 - Page 11 News List

AT&T, rivals say barriers remain in China market

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AT&T Corp, BT Group Plc and Nippon Telegraph & Telephone Corp said high costs and competition will prevent them from investing in China's traditional phone business even after barriers preventing expansion are lowered.

China on Saturday let overseas companies apply to start fixed-line phone services in Beijing, Shanghai and Guangzhou, meeting a timetable set by the WTO. AT&T said the government is asking foreign entrants to buy a US$250 million license before services can begin.

"Entry cost is too high and we're not interested in making that kind of investment" in the fixed-line business, said Steve Lowe, a Hong Kong-based AT&T vice president in charge of Asia operations outside Japan.

Start-up costs, including funds to build the basic networks, may deter foreigners, allowing the four local operators, including China Telecom Corp (中國電信) and China Netcom Group Corp (中國網通), to maintain control of the domestic fixed-line market, an analyst said.

"For a foreign operator to make a meaningful stake in this market, it would cost billions of dollars to build the networks from scratch," Edison Lee, an analyst at Credit Suisse First Boston in Hong Kong, said in an interview. "The existing operators are already very strong and have a lot of scale. What can foreign operators actually bring to the table?"

China Telecom, the nation's biggest fixed-line operator with more than half the market, and three rivals dominate the country's fixed-line business, which had 299 million signups as of June, according to the Ministry of Information Industry. Under the new rules, foreign investors will be limited to a 25 percent stake in fixed-line ventures with Chinese companies.

"Even without the entry cost, fixed-line is not the right market for us," Lowe said.

He said he favors attracting corporate clients in the world's most populous nation.

AT&T expects sales in China to grow as much as 29 percent this year, led by gains in network connectivity solutions and other businesses it offers to multinational companies in cities like Shanghai, Lowe said.

China's telecom market is still highly regulated and the WTO agreement won't solve all the problems, he said.

BT, Britain's largest phone company, agrees that offering fixed-line phone services is not what's attracting them to China.

The company aims to offer services, such as conferencing, to multinational companies with business in China, David Clarke, BT's head of public relations in Asia Pacific, said in an interview.

As a part of its commitment to the WTO, China has been removing some barriers to foreign investment in telecommunications. The series of changes, scheduled to be completed in 2007, will let foreign carriers offer both fixed and mobile services nationwide with a 49 percent stake in ventures with local carriers, the trade group said.

Foreign carriers may be more interested in China's wireless business as the market adds more subscribers than fixed line, Lee said.

From Saturday, foreign carriers have been allowed to hold a 49 percent stake in ventures with local companies in the wireless market, according to the WTO. Operation is still limited to 17 cities in the country. By 2006, foreign carriers will be allowed to offer services nationwide.

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