AT&T Telecom Joint Venture Established

AT&T Telecom Joint Venture Established

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In a historical step designed to further open up the nation's tightly-controlled telecommunications market to foreign competition, China has given the go-ahead for AT&T, the largest US telecom operator, to set up a US$25 million broadband Internet joint venture in Shanghai.

AT&T will have 25 per cent stake of the joint venture, Shanghai Symphony Telecom Co., Ltd, with the remaining shares going to Shanghai Telecom, the Shanghai subsidiary of China Telecom, the country's largest telecom operator, and Shanghai Information Investment Inc, a Shanghai government-funded business. The deal will be officially announced Tuesday in Shanghai, sources close to it told China Daily.

The joint venture makes AT&T the first foreign player in China's telecom sector, which analysts believe will strengthen foreign confidence to pump billions of dollars into potentially the world's largest telecom market. Analysts said the deal will serve as a role model for foreign investors in the State-gripped market and other foreign firms are expected to follow the AT & T example when China enters the World Trade Organization.

However, there are still concern about how far the Chinese Government will commit itself to foreign telecom players in the period leading up to WTO entry.

And analysts said China's fledgling legal framework for foreign investment will take time to upgrade.

Nevertheless, the atmosphere now is jubilant - because the deal has been made after eight years of negotiations.

The start-up will provide a broadband Internet service in Pudong for multinationals like Shanghai General Motors and CitiBank Group, linking the companies' local networks with their headquarters in the US.

"The move has made history,'' said John Huang, a partner at AllBright Law Office responsible for the legal side of the deal.

China has, for a long time, banned foreign investment in the telecom business, citing concerns about the exposure of state secrets and the inability of domestic telecom operators to compete effectively against foreign competitors.

However, foreign investors have pinned their hopes on entering the telecom services market in China as cut-throat competition in the telecom equipment market among global giants like Nokia, Ericsson, Motorola, Lucent and Alcatel has watered down profit margins.

Huang said Monday that overall investment in China's entire telecom sector is expected to hit US$500 billion in the next two decades.

"China is such a big opportunity for multinational telecom operators that they will always be watching the market here,'' said Gordon Orr, the managing director of the US firm McKinsey & Company's Greater China Office.

More good news is that China has been moving towards a solid legal framework for foreign investment, analysts said.

For example, one of the most striking efforts was a new rule in September which defined the telecom business areas and the role of foreign investors. Basic telecom services like fixed-lines, satellite and mobile networks are still off-limit. But foreigners can now get up to a 49 per cent stake in joint ventures with Chinese firms in some areas including Internet access, e-mails and data transmission. "The regulation will be a guideline for investment. A clear regulatory framework will strengthen foreign confidence,'' said Orr.(China Daily)