China Railway Telecom to Be Inaugurated

China Railway Telecom (CRT), being regarded as the only telecom developer challenging China Telecom in the sector of China's fixed-line business, will be formally put into operation March 1, said General Manager Peng Peng with the new company to be launched.

The Ministry of Railways, China Railway Telecom's parent organization, will hand over all of its operation rights to the new company on February 28 at 6:00 pm.

Following China Telecom, China Mobile, Unicom, Jitong, Netcom and China Satellite Telecom, CRT will be launched as the 7th telecom developer in China's telecom market.

The newly licensed company will be permitted to undertake a wide range of telecom business except mobile telecom. But it is expected to focus on China's fixed-line market, which is currently dominated by China Telecom.

Next to China Telecom in Scale

As a breakaway from the Ministry of Railways, CRT is to claim the biggest special communications network in China. "Railway is the mother of Telecom. Our telecom network developed on the basis of railways can reach wherever the train goes", said Peng.

As an independent transportation sector, railways boast a telecom system all of its own. Every staff member in the Ministry of Railways is usually equipped with two sets of telephone numbers, numbers ordinarily used in everyday life and those used the railways in five digits, namely, "extension numbers" under a unified railway system. Phone users are reported to have exceeded over one million.

By the end of 1999, over 120,000 km trunk/extension telecom lines were reported to have been in operation, including 40,000 km of optic-fiber, 4,600 km of digital microwave, and 70 satellite stations, a countrywide communication network linking up over 500 Chinese cities. Also, the Ministry has added SDH equipment all along its 11 trunk lines since last November.

Judging from international experience, reforms undertaken for improved railway telecommunications all have reaped great successes. Japan's railway telecom is one: Launched in 1987, it had been made a large telecom developer alongside the others in Japan in 1989. Railway telecom development in Germany has not been excepted. Railway telecom developers in Britain and Canada have also been in vigorous growth as leading telecom operators in their homegrown markets since after getting out of their past ivory tower and onto a competitive market.

Sources say that CRT has been authorized to develop telecom service at a price lower than that of China Telecom to attract a multitude of new users.

It is said that China Railway Telecom is destined to be a rival, if any, of China Telecom, controlling China's fixed-line market by relying on its resources and preferential policies provided.

Far from a Real Threat

However, experts predict that CRT has a long way to go before making itself a genuine competitor to challenge China Telecom. Compared with the Giant claiming 68 percent of China's 200 million telephone users and a yearly income of 170 billion yuan in 2000, CRT only has an asset of about 13 billion yuan and still has got many problems on hand. These include:

  • 1. Though CRT owns the second largest communication network in China, its network quality, especially in coastal areas, is far from being satisfied. Most of its fiber optical cable used has a mere transfer capacity of around 2.5 gigabits and coaxial cable is even still in use in some places. In contrast, Netcom, Unicom and some others as new developers have started on 10-gigabit optical quality networks.


  • 2. CRT has a working staff of around 65,000, a figure three times over China Unicom's 20,000. But by a large staff is not meant merited returns or work success. For a planned economy developed over a few dozen of years many people may feel uncomfortable in a new market-oriented company. Meanwhile, a dearth of intellectual resources as those of personnel with expertise worthy of their name is found.


  • 3. Huge profits always come after huge investment when telecom industry is developed. As a newcomer, CRT needs lots of money for a large market, to attract talents and upgrade its network. Obviously, this is much more than the Ministry of Railways can provide. The only way out is to raise money on the stock market. It is unofficially revealed that CRT has a plan to get listed in China and the U.S. in coming three years. But ironically it faces even more heated competition in the fund-raising process because all other players except China Satellite Telecom have already had their own plans and set about moves to get listed.


  • 4. Preferential policies merely will help nowhere. When China Telecom's service price is put under strict control as is done by the Chinese government CRT's service price set at a lower level than the former may help get itself on feet. But an ease of this is predicted pending China's WTO accession. This is to say CRT will have to face all new competitions on its own.


    • A Telecom-Unicom Ties-in Possible?

    A rumor has it that CRT will merge with China Unicom and will form a telecom giant with CRT's resources and Unicom's technology and market experiences. Insiders reveal that such a merger is not impossible.

    Most important of all, China Unicom is closely linked to the Ministry of Railways as its largest shareholder. As early back to the days after its inauguration, China Unicom already had a plan to start on the telecom business of the Ministry of Railways. But two factors hindered the effort: One is no agreement reached as yet on share apportioning; the other is that China Unicom balks at taking over such a big network.

    An expected merger has thus been prevented for the two factors said. Also for an expansion of operation by China Unicom and its infrastructure construction CRT's network resources become less attractive than before.

    But it does not rule out the possibility of government's intervention to help such a merger of CRT with China Unicom for nurturing a highly competitive telecom market in China.

    Anyway, "The establishment of China Railway Telecom will make a complete change in China's telecom industry", said Xie Xiaoxia, researcher with the Chinese Academy of Social Sciences.



    By PD Online staff member Shu Zhenhong


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