China telcos anticipate WTO entry

World Trade Organization (WTO) negotiators are set to formally recommend the terms of China's entry into the WTO in a final draft agreement in Geneva on Monday.

Chinese telecommunication companies, which have held a monopoly in the market, said WTO rules allowing for up to 49 percent foreign ownership after 3 years will not overly affect the current telecommunication system since reforms are already underway.

According to China Daily newspaper, foreign telecommunication operators will be permitted to take a 25 percent share in mobile telecommunication firms, rising to 35 percent after one year.

Although state-owned telecommunication giants may be hit as competition stiffens, smaller domestic operators favor WTO regulations that will promote competition.

"The Chinese government will continue to enforce a series of preferential policies, including asymmetric regulations, which will favor development (for domestic players)," said Sophia Tso, a China United Telecommunications Corp. (China Unicom) spokeswoman.

At the same time, the presence of foreign players does not threaten the local carriers, a China Mobile Communications Corp. spokesman said.

Instead, the progressive opening up of China's telecommunication market to foreign investors will "promote advanced management practices and enhance foreign capital into China's telecommunication market," speeding up technological advancement, he said.

China Unicom's Tso said that there's more than enough to go around in China's burgeoning telecommunication space. "China Unicom emphasizes a lot on the importance of cooperation with foreign telecommunication operators... and has been working with KDDI, SK Telecom, Telstra and Sprint," she said.

Citing China's Ministry of Information industry statistics, which forecast 260 million to 290 million mobile phone subscribers by 2005, Tso said the mass market potential in the Chinese Mainland provides ample opportunity for growth for both foreign operators and local incumbents.

According to market research firm International Data Corp. (IDC), telecommunication reform after the accord is signed will not have any discernible impact on global operators already operating in the region.

"What will happen, however, is a gradual opening of the market as foreign investment drives competition and industry evolution domestically," said Lain McNeill, senior analyst of Telecommunications Services at IDC Asia-Pacific. "With these changes will come the eventual deregulation that the global players are hoping for -- something to get them beyond the services they can offer that are limited to the international half of private leased lines."

While the easing of limitations on investment will provide viable opportunities for foreign companies eager to secure a point of entry into the Mainland market, McNeill said, return on such investment will be diluted as numerous players are likely to participate.

The accord, which has taken over 15 years to come to fruition, will make China a full-fledged WTO member by the end of 2001, a WTO statement said.

Monday's discussion in Geneva will put a rubber stamp on the world's most populous nation's accession into the WTO. The agreement will then be formally approved at the WTO's meeting of trade ministers scheduled to be held in Doha, Qatar, in November, the WTO said.

IDC is a subsidiary of International Data Group Inc., the parent company of IDG News Service.

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