China, Land of Promise and Rivalry for Int'l/Home Telecom Developers

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Last updated at: (Beijing Time) Thursday, May 23, 2002

China, Land of Promise and Rivalry for Int'l/Home Telecom Developers

It almost makes no exception that not few world known telecom giants haven't underperformed with an average number of over 20,000 employees slashed. Typical are NorTel, Lucent Science & Technology, Motorola, Alcat and Ericsson known for their business operation with an aggregated number of 49,000, 45,000, 43,000, 33,000 and 22,000 employees cut respectively as we have learned from the world telecom market. But in China...

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The last two years have seen many international telecom giants are almost similarly associated with such unwelcome terms as being run "in the red" or "deficit", with a cut force employed, a "shrink" of interest from stock markets, etc. AT&T, known as the largest telecom developer in the US, has already been in debt up to over 53 billion USD. Motorola also fared no better as a telecom giant now becoming deficit ridden though it has a history of over the past 70 years behind it.

Summarily speaking, it almost makes no exception that not few world known telecom giants haven't underperformed with an average number of over 20,000 employees slashed. Typical are NorTel, Lucent Science & Technology, Motorola, Alcat and Ericsson known for their business operation with an aggregated number of 49,000, 45,000, 43,000, 33,000 and 22,000 employees cut respectively as we have learned from the world telecom market.

China: a mobile telecom market of the world largest

Against this is however a somewhat different picture given in China. Many heartening successes have been learned from those of telecom giants with businesses developed on the country's telecom market.

April 30, Ericsson declared that it had 55 million USD worth contracts signed with its Chinese counterpart China Unicom for expanded updated CDMA deals in 7 Chinese provinces including Jiang, Anhui, Sichuan, Yunnan, Henan, Heilongjiang and Liaoning. And as part of these to further its services in China, Ericsson made the point to have its headquarters moved to Hong Kong instead of keeping it in Singapore. So far, Ericsson has by its massive telecom operation turned itself into a telecom conglomeration with 26 agencies, 10 ventures and 4 solely funded companies reinforced by a technical force of 4,500 throughout China.

April 12 saw Calcat inaugurated its first telecom technical foundation in Shanghai and set to build its research center in China in the place of those from other lands. As things now stand with world telecom development, China has been made by itself the world's third largest telecom research and development base alongside the other two in Europe and North America.

Motorola has also made known its new investment plan up to 500m USD for a growth of its telecom business in China in the coming five years. "We are in the hope to turn China into Motorola's production and development center and run it on a world scale. By 2006, our investment will be at a sum of 10 billion USD and in return for these will be a turnover of 10 billion USD and 10 billion purchasing locally made" said incumbent CEO of Motorola.

Last year Lucent had won out in its bidding for China Unicom's CDMA first-phase project construction. It was told several hundred million USD worth of equipment has been involved to be put at the service of 43 Chinese cities in a dozen provinces and autonomous regions claiming a total of over 4 million users.

In a word, China is no longer its past. It has by itself been developed into a "retreat away from the world" promising telecom developers fine vistas to look into their future development.

Essential is a sustained fast growth of China's IT industry without doubt. There are altogether 250 billion yuan of investment that has been made in fixed assets. Due to a nationwide telecom coverage, as shown by a yearly 25% growth, with 160 million handset users developed, China has already been made a mobile telecom market of the world largest.

But to what a future date can that situation be developed and a fast growth of cause still claimed by those transnational telecom developers in China?

For the present these are seemingly vexatious problems but they are not being raised to no purpose or without reason.

First, as time goes by, China's telecom already points to a sluggish market. Against a drop in China's telecom turnover instead of a growth in 2001, China Unicom and China Mobile had begun a cut in their outlays since this year began.

China Unicom used merely 7.88 billion yuan on telecom against 20.78 billion yuan in 2001. A 20 percent cut of budget was also made for developing mobile telecom. Instead of developing increased services for 15 million new users China Unicom had to order a slowdown in DDMA construction and a delay in launching its CDMAIX project to bring on market losses to telecom developers including Lucent, Motorola, Ericsson and others.

Second, as told by many signs, China has become a telecom market where competition becomes most grueling and not a transnational product would not be similarly tested through rivalry by many others including those domestically produced. Of Chinese telecom developers known to China's photo-telecom market in 2001, Huawei Technologies Co. Ltd ever ranked first for a 32 percent of share, NorTel second for an 18 percent of stake. Telecom developers like Zhongxing Telecom are noted for their marked success made on the country's CDMA market. With China's CDMAIX there is also the presence of Chinese telecom developers like Huawei Technologies Co. Ltd. exerting increased pressure on Ericsson, Lucent and NorTel.

So Motorola was directly told by Wall Street not to place any hopes on accrued profits to check its downward course of development in China. To play safe, putting to sale of assets has been under consideration by Lucent on the Chinese market. Responsible official with NorTel speaks about a piece of his mind, "There is hardly a manufacturer noted for having any success made last year. Almost every telecom manufacturer is in an uneasy mood and on tenterhooks."

To be in brief, things are no longer plain sailing but hard going for telecom transnationals nowadays in China for fierce rivalry rises on such a huge telecom market.

By People's Daily Online

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