China Telecom Faces Tests of Charge Readjustment

At the recently concluded telecom charge readjustment meeting, most of the problems discussed concentrated on China Telecom. China Telecomm, in operation not very long and its readjustment not yet been in place, will face painful tests.

For China Telecom, the adjustment of telephone charges will directly result in a reduction of 20-30 billion yuan worth of income. Despite the rapid popularization and development of China's fixed telephone service, the regions with a certain consumption ability have by and large neared the point of saturation. The phenomenon will probably become more serious if city telephone rate is raised. The official charge standard set down at the conference is said to be like this: the monthly rent of a phone is 25 yuan. The charge of communication by phone is 0.2 yuan per minute.

Within the range of wireless city telephone network, one can receive and dial international and domestic long-distance calls. But it has no roaming functions. There has always been controversial about this local wireless telephone. Some people think it to be an outdated technology and there has been precedent of popularization failure in Japan and some other countries. However, the targeted consumers of the local wireless telephone do not care whether the technology is advanced or outdated. The words "Enjoying wireless telephone by paying only for wired telephone" give an accurate summation of its advantages.

After the separation of China Mobile and China Telecom, China Telecom took over all the debts and retirees. The asset-liability ratio is high and the non-performing assets are in large amounts. Many policy-related preferential treatments are gradually disappearing with mounting pressure on business operation. The originally most profitable long-distance call service is subjected to the increasingly severe impact of IP telephone. The fast growing data communication, which should have become a new growth point of China Telecom, obviously will not be able to have much improvement in one or two years.

In view of this, the reorganized China Telecom urgently needs a new profit growth point. Mobile phone is, of course, the first choice. Although leaders of the Ministry of Information Industry have publicly announced that the ministry has no plan to issue 3rd generation Telecom license, however, as early as last March and April of this year, there had been rumors about China Telecom applying for the license, while the local wireless telephones were sold as hot cakes, successfully diverting the income from mobile telephone rates.

The competition between China Mobile and China Telecom has become white-hot. However, even if China Telecom constructs a mobile phone network, it still needs at least five years to reach the present scale of China Mobile. It is a wise move to tap the potential of the existing fixed telephone network.

People's Daily Online --- http://english.peopledaily.com.cn/