China splits national telecommunications giant

ITworld.com –

The long-awaited breakup of China's largest telecommunication company was formally achieved Thursday when China Telecommunication (Group) Corp. (China Telecom) ceded operations in 10 northern provinces to a consortium of former competitors.

The new China Telecom Corp. will continue to operate services in 21 provinces in southern and north-western China and hold 70 percent of the national trunk transmission network assets owned by the former China Telecom. A new competitor called China Netcom Communication Group Corp. will amalgamate the former China Netcom, Jitong Communications Corp. and the China Telecom operations in the 10 northern provinces.

China's telecommunication market now has six operators -- China Telecom, China Netcom Communication Group, China Mobile Communications Corp., China United Telecommunications Corp. (China Unicom), China Satcom and China Railway Telecom (China Railcom).

The split -- originally proposed in October 2001 -- forms part of China's obligations to open up its telecommunication market upon entering the World Trade Organization (WTO), according to Minister of Information Industry Wu Jichuan.

"The establishment of these two companies deepens the organizational reform of our nation's telecommunication industry, a requirement of our entry into the World Trade Organization," Wu said, according to the transcript of a speech given to mark the split.

Foreign companies have been gradually investing in China, as the company tentatively opens up its telecommunication market in line with its WTO obligations.

AT&T Corp. has a 25 percent stake in a data communication company called Shanghai Symphony Telecommunications, while media company News Corp. and Dell Computer Corp. are among foreign companies who made a US$325 million investment in China Netcom in 1999.

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