Lucent: China to spend $US100B on telecoms upgrade

China is expected to invest $US100 billion ($A155 billion) over the next five years upgrading all aspects of its telecommunications systems as increased market deregulation creates massive demand, according to a senior Lucent Technologies executive.

"Market growth is simply phenomenal for telecommunications networks, and there are tremendous opportunities for vendors as deregulation brings more network providers into the market," Rau Chang, Lucent's senior vice president for China, said here last week. "This marks a very significant change for China."

Growth projections Rau made about the Mainland China telecomms market included:

* Wireless phone subscriber numbers are rising by a rate of one million a month, from 25 million at the end of 1998 to an expected 100 million by 2004, an annual growth rate of 44 per cent.

* About 100 million fixed-line phones are in place now up from 87 million at the beginning of this year, an annual growth rate of 17 per cent.

* A total of 180 million fixed and wireless lines will be added in the next five years, and penetration of telephone services will rise from 9 per cent of China's population in 1998 to 67 per cent in 2020.

* The number of internet subscribers has doubled since the beginning of this year to four million, and this figure will reach 10 million some time next year, as subscriptions rise by 10,000 a day.

* Subscriptions to cable TV, which will soon add data services, has reached 90 million.

The Chinese government has signalled its commitment to market deregulation with a number of initiatives designed to improve the competitive position of China United Telecommunications Co (Unicom) against the national incumbent carrier China Telecom Ltd, Rau said.

First, China Telecom has been split into separate companies covering fixed, mobile and satellite communications. Second, Unicom has received licences to run a CDMA (code division multiple access) network, internet services and internet telephony, international voice gateways and long-distance networks, he said.

Unicom will spend $US3 billion this year on its existing GSM (global system for mobile communications) network and $US800 million on building a two million subscriber capacity CDMA network, Rau said.

New operators are being formed to address various sectors of the telecommunications market in line with World Trade Organisation (WTO) rules on competition, Rau said. The closed nature of China's telecomms market has long proved to be a major obstacle towards the country joining the WTO.

The new Mainland operators, according to Rau, include China CATV Networking Corp moving into the high-speed internet access business and limited investment by foreign carriers, such as AT&T's joint venture with Shanghai's telephone authority.

The main question to be answered is how fast China's telecommunications market will be deregulated and what limits will be placed on foreign ownership, Rau said.

"Most of the competition now is between the national carrier and other state-owned entities," he said. "China has already agreed to the WTO idea of foreign investment in telecommunications, and private sector investment will come when foreign companies are allowed in."

Rau's comments, however, do not quite gel with a recent move by Unicom. The telecomms carrier last month dissolved a GSM joint venture investment partnership with Nippon Telegraph & Telephone Corp (NTT) and Itochu Corp in line with a long-standing Mainland government directive to end indirect foreign investments in Chinese telecomms companies. Direct participation by foreign companies in China's telecomms industry is banned.

AT&T, British Telecommunications PLC, NTT and Sprint Corp are all hoping to enter the China telecommunications market, Rau said.

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