China Approves New Telecoms Operator to Compete with China Telecom

Strategic Insights -

China has approved the setting up of a new telecoms operator, China Railway Telecom, which will link 500 cities and challenge the dominance of China Telecom. The new operator will have access to 120,000km of existing lines, including 40,000km of fibre optic lines, and will offer a range of fixed-line services, excluding mobile telephony. The company is expected to make its debut by the end of the year and will employ 65,000 staff. The emergence of China Railway Telecom is seen as a step towards introducing more competition in the domestic telecoms market ahead of China's accession into the World Trade Organisation (WTO).

Key Takeaways:

  • China Railway Telecom has been awarded a license to operate a network that will link 500 cities, challenging the dominance of China Telecom.
  • The new operator will have access to 120,000km of existing lines, including 40,000km of fibre optic lines, which can transmit more data at higher speeds than conventional telephone lines.
  • China Railway Telecom will offer a range of fixed-line services, including long-distance, data communications, and internet, but not mobile telephony.
  • The company is expected to make its debut by the end of the year and will employ 65,000 staff.
  • The emergence of China Railway Telecom is seen as a step towards introducing more competition in the domestic telecoms market ahead of China's accession into the World Trade Organisation (WTO).
  • China Railway Telecom's ownership of "road rights" allows it to lay lines alongside China's rail tracks, giving it a key advantage over other operators.
  • The company's network is estimated to be worth Rmb10bn (Dollars 1.2bn).
  • The new operator is expected to lead to falling telecoms fees over time, as it will be licensed to offer competitive prices.

China Railway Telecom will have significant implications for the domestic telecoms market, allowing for more competition and potentially affecting the planned overseas share issues of China Telecom and China Netcom. Foreign companies will also be allowed to form joint ventures to offer telecoms services after China's accession to the WTO.

Statistics:

  • 500: number of cities that China Railway Telecom's network will link.
  • 120,000km: length of existing lines that China Railway Telecom will have access to.
  • 40,000km: length of fibre optic lines that China Railway Telecom will have access to.
  • 65,000: number of staff employed by China Railway Telecom.
  • Rmb10bn: estimated value of China Railway Telecom's network.
  • Rmb10bn/Dollars 1.2bn: conversion rate for Rmb to Dollars.
  • 25%: stake held by the Ministry of Railways in China Netcom.
  • 1994: year in which China Unicom was set up.
  • 2001: year in which China is expected to join the World Trade Organisation (WTO).

Sources:

  • China Daily Business Weekly
  • Ministry of Information Industry (MII)
  • Ministry of Railways (MOR)
  • China Telecom
  • China Unicom
  • World Trade Organisation (WTO)