Telecom Sales Slump in Rural Areas: MII

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Last updated at: (Beijing Time) Tuesday, April 30, 2002

Telecom Sales Slump in Rural Areas: MII

Fixed-line telecom service losses in the countryside increased even more in the first quarter of the year, according to officials at the Ministry of Information Industry (MII).

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Fixed-line telecom service losses in the countryside increased even more in the first quarter of the year, according to officials at the Ministry of Information Industry (MII).

Growth of new customers has begun to decline, the period shows, and operators' income dropped further.

According to MII, 2.819 million residents in the countryside installed fixed-line telephones in the first quarter, a 41 per cent drop compared to the same period last year.

Revenue from fixed-line telephones in the countryside continued to drop to a total of 4.78 billion yuan (US$575.9 million) in the first three months. Total net losses reached 150 million yuan (US$18 million), an increase of 15 per cent from last year's loss base.

"The problem is quite serious and will hurt the long term development of telecom operators,'' said Dai Shuang, director general of MII's planning department.

The losses may also widen the digital divide between eastern and western and urban and rural areas, he said.

Dai said MII is actively promoting adoption of a universal service fund to subsidize losses and provide services to the countryside.

A universal service fund is a widely accepted and used subsidy system in the world for postal and telecommunications providers.

A telecom universal service refers to providing services, not only to developed areas but to the poor regions, using reasonable prices.

The philosophy behind the service is that everyone should have access to communications, officials said.

Zhang Chunjiang, vice-minister of MII, said earlier that China would soon set up such a fund to compensate losses of universal telecom service providers.

Both domestic and overseas telecom companies with businesses in China would be treated equally, he said.

Based on an analysis by industry experts, money for the fund would possibly come from telecom operators.

In the United States, telecom operators give money to the fund according to a ratio to their revenue.

A similar fund in China would help encourage the balanced development of the rich and poor regions of the country, said Zhang Xinzhu, a telecom expert at the Chinese Academy of Social Sciences.

But MII officials said there is still no concrete movement for the fund.

In the meantime, losses in the countryside will continue to dampen fixed-line carriers' plans to go public, industry experts said.

Both China Telecom and China Netcom, the country's two major fixed-line carriers, are planning to go public in overseas stock markets.

The atmosphere will not be very friendly if losses in the countryside continue and government subsidies fail to materialize, experts said.

Source: China Daily

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