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Tuesday, September 04, 2001, updated at 09:41(GMT+8)

Netcom Expects Major Gains from Telecom Restructuring

The big winner in the pending restructuring of China Telecom is likely to be China Netcom, industry analysts say.

Executives at the emerging telecoms carrier have adopted a discreet tone, but employees are looking forward eagerly to the final announcement.

"The carriers' carrier'' was established in 1999 by the China Academy of Sciences, the Ministry of Railways, the State Administration of Radio, Film and Television, and the Shanghai municipal government with the aim of building a nationwide backbone communications network and breaking China Telecom's monopoly in the network leasing business.

Before the birth of China Netcom, China Telecom controlled almost all the ground communications network resource and set very high leasing prices.

With the launch of China Netcom's nationwide backbone network, the prices for leasing the network resource fell by as much as 20 times.

In the regional divestment plans, China Telecom would be cut geographically into northern and southern companies, with the southern firm inheriting the name China Telecom and the northern firm merging with China Netcom, according to an official with the Ministry of Information Industry.

Under the plan, China Netcom would immediately have more than 80 million telephone users. It would also inherit part of China Telecom's network resources, other assets and its employees.

But managing half of China Telecom's 500,000 employees would be a difficult task for this new telecom carrier as it has a staff of only several thousand, said an official at the ministry.

In the second divestment plan, China Telecom would be cut into three parts according to different businesses, local phone calls, long-distance phone calls and data transmission. China Netcom would inherit the data transmission part from China Telecom, said the official.

Although the data transmission business contributed a minor 3 per cent to China Telecom's revenue, it is regarded as a future money maker as the data business is forecast to surpass the voice business in the near future.

As the divestment plans have been widely spread among China Telecom staff, some, especially those of data transmission bureaux, are busy preparing for the spin-off.

The final announcement of China Telecom's spin-off plan has been delayed, as the official said more and more telecoms experts had their thumbs down on separating the telecoms giant.

China needs a telecoms conglomerate that can compete with overseas companies after the country enters the World Trade Organization before the end of the year, said Zhang Xinzhu, researcher with the Chinese Academy of Social Sciences.

But the government seemed determined this time to give the fixed-line telecoms sector an overhaul, said Zhang, who is close to telecoms policy makers.

The State Development Planning Commission and the Office for Restructuring Economic System under the State Council are the operators for China Telecom's reform this time. The two had discussed the divestment proposals for months, with the final decision still due to be made.

Source: China Daily

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The big winner in the pending restructuring of China Telecom is likely to be China Netcom, industry analysts say.

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