BEIJING (AP)-China announced the breakup last week of the government’s telecommunications monopoly into four specialized companies, a move that comes as U.S. and Chinese negotiators hold down-to-the-wire talks on China’s bid to join the World Trade Organization.
The long-awaited decision on the dismemberment of China Telecom would potentially open up a $28 billion market to foreign competition.
China Telecom’s tight grip on 95 percent of that market has been a major stumbling block in the WTO negotiations.
Before setting out on his U.S. visit, Premier Zhu Rongji reportedly said China would allow foreigners to take up to 30 percent stakes in telecommunications companies.
U.S. negotiators trying to wrest concessions from China for an agreement on WTO membership during Zhu’s visit want 50 percent foreign equity in telecommunications ventures.
China Telecom’s vast operations will be divided into a traditional phone company, a mobile communications company, a paging company and a satellite communications company, the Ministry of Information Industry said in a statement.
“The breaking up of China Telecom is aimed at smashing the telecommunications monopoly in China and introducing competition to set up a fair and orderly market,” Minister of Information Industry Wu Jichuan said in a statement, carried by the state-run Xinhua News Agency.
But industry analysts have questioned how much competition will be created by splitting one giant monopoly into what many see as four specialized monopolies.
A previous attempt to create a competitor to China Telecom has largely failed. China Unicom holds the other five percent of the Chinese telecommunications market, but has just $15.7 million in assets compared with China Telecom’s $68 billion.
But since Chinese leaders consider information technology a crucial field for future prosperity and economic power, they have shown an interest in propping up China Unicom and welcoming more foreign investment in the sector.
The Xinhua report gave no time frame for the China Telecom break-up. Wu said new regulations for the telecommunications sector would be put in place in the first half of the year.
