NEW YORK-AmTec Inc. has its home base in the Big Apple, where the money is, and its heart in the People’s Republic of China, where it believes telecommunications has the greatest growth opportunity.
Several years ago, AmTec became one of 46 foreign companies to forge joint ventures with China Unicom to develop new wireless telephony systems in Hebei, a province with 64 million people that surrounds Beijing.
“As far as I know, [foreigners] can’t get any more province-wide licenses any more,” said Joseph R. Wright Jr., president of AmTec, at a recent New York Society of Security Analysts Telecommunications Conference.
“Uncertainty equals opportunity. If there were no uncertainty, AmTec would not exist. Bell Atlantic Corp. and British Telecom would have gone in already.
“We went in knowing full well the big guys will be there eventually, and then the bidding will start.”
AmTec is a 35-percent owner of six new Global System for Mobile communications networks that launched commercial service last fall and have about 37,000 customers in total so far. By year’s end, another four networks are scheduled to begin operations.
“Unicom holds the license, and we build the networks on a full payment lease over 15 years,” Wright said.
The company president added he is hopeful, even optimistic, about the Chinese government’s ongoing review of allowable foreign ownership of new domestic telecommunications carriers. Wright said he believes the resulting regulatory revisions, when they happen, will not reduce below 35 percent the stake permitted to companies, like AmTec, already involved in joint ventures there.
Wireless carriers already on the ground benefit from the existing duopoly with high barriers to entry present in China’s cellular markets, he said. Furthermore, the current average penetration rate is about 1 percent for cellular and 7 percent for wireline customers. The annual growth rate for cellular customers exceeds 30 percent.
“The usage pattern is that people are using cellular in place of fixed wire because they don’t have landline phones,” Wright said.
GSM technology is ubiquitous and growing in China today “because the Europeans got there first and offered better financing terms,” he said.
“There are four teeny-tiny [Code Division Multiple Access] trials going on because of Motorola Inc. Because of bandwidth constraints, the largest cities may get CDMA in about 10 years.”
AmTec also is exploring actively opportunities on the wireline side of telecommunications. It has formed a joint venture with Fusion Telecommunications International Inc., a privately held, facilities-based, multinational long-distance carrier. It is joining forces with United International Holdings, which will become AmTec’s largest shareholder, to offer cable TV services. AmTec also has taken an ownership stake in IXS.NET, a private Internet telephony company that provides Internet protocol-based fax transmission services between the United States and China, Taiwan and Hong Kong.
However, AmTec is unlikely to bundle these services with cellular telephony or each other because “the existing regulatory environment in China makes bundling tough to do,” Wright said.
