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Deal Could Stretch Telecom Regulation
China's telecom sector looks poised to open up even wider despite the absence of clear investment rules, with Harbin-based private firm Orient Group on the verge of concluding a landmark equity deal with Jitong Communications.
Zhang Hongwei, chairman of Orient Group, a non-State trading firm, said his company is in close contact with Jitong, discussing the possibility of co-operation in the telecom business.
If a deal is struck, Orient will be the first domestic private firm to enter the country's telecom sector.
Zhang, also a member of the Chinese People's Politicaxl Consultative Conference (CPPCC), proposed during last year's CPPCC National Committee gathering that, prior to opening up the telecom market to foreign companies, the government should allow domestic non-State firms to establish themselves in the sector.
A year later, his proposal moved one step closer to being realized when Orient Group set up a subsidiary called Orient Satellite Network Inc, which manages satellite communications and broadband Internet services.
Jitong Communications is one of China's seven basic telecom operators and focuses on Internet protocol telephony and satellite communications.
According to some sources, Orient has already dipped its toes in China's telecom pool.
"Jitong and Orient have already begun co-operating in the satellite business," a Jitong spokeswoman, who preferred to remain unnamed, revealed to reporters recently.
According to a report from the 21st Century Economic News, Orient is also involved in serious negotiations with Jitong over a possible purchase of equity.
Orient would not be the first to break into the telecom sector if it does conclude a deal with Jitong.
According to the Telecom Regulation, issued by the State Council on September 25 of last year, domestic private firms and foreign companies are banned from entering into basic telecom business in China. But just weeks ago, China Netcom Corp sold 12 per cent of its equity, worth US$325 million, to US-based companies News Corp and Goldman Sachs and two Chinese banks.
The transaction ranked among the largest private equity placements in Asia, and was the first direct private investment by international investors in China's telecommunications industry.
"The equity placement received strong support from the industry regulators and the State," Edward Tian, CEO of China Netcom, said in response to questions about the ban.
"The event signifies the further opening of China's telecom industry," he added.
The move has ignited a hot debate among telecom experts and domestic investors.
Source: China Daily
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