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Railway Telecom to Pull Out with License from MII
Deregulation in the domestic telecom market, in anticipation of World Trade Organization accession, moved one step closer to opening up to domestic players recently as the railway sector received a licence to provide telecom services nationwide.
China Railway Telecom, now the country's biggest special communications network, is to be officially established in the coming weeks to provide fixed-line and data transmission services.
The new firm is expected to focus on the country's fixed-line communications market, which is currently dominated by China Telecom.
"China Railway Telecom will make its debut before the end of the year," said Liu Cai, director of the Policy and Regulation Division of the Ministry of Information Industry (MII).
Liu said preparation is in its last stages and both MII and the State Council have approved the licence application.
According to insiders close to the Ministry of Railways, which is the former owner of the railway telecom system, the new firm would have the right to operate basic telecom services like long distance calls, local calls, data transportation and Internet related business, but not mobile communications.
With the country's second biggest telecom network, the new firm is destined to be a strong rival of China Telecom, which controls the fixed-line telecom business.
Separated from the Ministry of Railways, over the last 50 years China Railway Telecom has established a giant communications network covering the whole country.
"Railway is the mother of telecom," said Peng Peng, president of the to-be-launched company.
"Our telecom network developed on the basis of railway lines, and can reach wherever the train goes," Peng said.
The president said the firm would have a working staff of around 65,000, which is over three times the 20,000 of China Unicom, the country's second biggest telecom operator after China Telecom.
With China's pending WTO accession, the government decided to decentralize the telecom service industry in 1998 when China Telecom's monopoly was divided into four independent parts.
The continued policy support for China Unicom, the country's second largest telecom operator, also testifies to the government's efforts at cultivating a competitive telecom market.
The opening to domestic players has become another major step in the reform.
The existing railway-based system is massive.
Every railway staff has a special five-digit telephone number and total subscribers has passed 1 million, according to statistics from the Ministry of Railways.
By the end of 1999, the total length of railway telecom's network was 120,000 kilometres among which optic fibre covers 40,000 kilometres. The network covers 500 big and middle-sized cities around the country.
That telecom network is the most valuable asset of China Railway Telecom, experts said.
In some middle and small-sized cities, railway telecom's network has obvious advantages compared with China Telecom.
Railway telecom even owns special "road rights" along the railway line, which allows the firm to dig ditches and construct an underground telecom network within a certain range of the railroad.
The total value of the railway telecom network is estimated at around 10 billion yuan (US$1.2 billion).
The experts also said that China Railway Telecom plans to go public in both China and the United States in the next three years.
"The establishment of China Railway Telecom will make a total change in China's telecom industry,'' said Xie Xiaoxia, researcher with the Chinese Academy of Social Sciences.
"China Telecom's monopoly will be finished by the new firm," Xie said.
The researcher added that although China Unicom started to operate fixed-line telecom business in 1994, its influence is too minor to be called a competitor of China Telecom.
China Railway Telecom should change the situation, she said.
Local fixed-line telecom has long been regarded as a monopoly by government officials and operators of China Telecom, but Xie disagrees.
The researcher said the government should encourage more competitors to enter fixed-line telecom business via network renting to avoid waste in duplicated network construction.
The government should guarantee that every telecom operator has the right to rent the local fixed-line telecom network to encourage competition, Xie said.
"The network resource should be opened to every company,'' she said.
Established in 1994, China Unicom is the first competitor to rival China Telecom, but burdened by its lower network capability, Unicom has long been overshadowed and could not be called a real rival in fixed-line telecom.
Some rumours say China Railway Telecom would be merged into China Unicom after three years of independent operation, but company and MII officials declined comment.
Rising Rival in Domestic Telecom Market
Railway telecom, another rival following China Unicom, China Jitong and China Netcom will join in the competition of domestic telecom market. As learned, the Ministry of Railways, ready to set up a Railway Telecom Company, is now applying for a license of business operation.
The railway telecom, when licensed, will be permitted to operate all kinds of telecom businesses except the mobile communications, which range from trunk to local calls, and from data transmission to networking operation.
As a matter of fact, the railway telecom has already had a huge telecom network, and as an independent transportation sector, the railway has its own telecom system. Usually, the staff members of the Ministry of Railways are provided with two telephone numbers: one being the ordinary one and another the "railway telephone number" of five digits, namely, the "extension number" within the railway system itself.
The telephone users are reported to have outnumbered one million. By the end of 1999, the railway has 120,000 km of telecom trunk and extension lines, including 40,000 km of optic-fiber, 4,600 km of digital microwave, and 70 satellite stations, a large communication network covering more than 500 cities throughout the country. In addition, the Ministry has added SDH equipment all along its 11 trunk lines since last November.
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