Telecom Cos. Await China Changes
Thursday, September 21st 2000, 12:00 am
By: News On 6
NEW YORK (AP) â€” Although the Senate's approval of normal trade relations with China will open this vast Asian market to U.S. telecommunications companies, there have been few hints that the industry is planning a rapid expansion there anytime soon.
Concerned about barriers to investment, U.S. providers of Internet, wireless and phone services are awaiting the particulars of the trade bill approved Tuesday.
It has been nearly a year since China and the United States hammered out the deal that led to the trade bill, and it could take at least as much time before U.S. telecoms learn just how far and how fast they will be allowed to press into the Chinese marketplace.
The bill to make trade relations permanent is an outgrowth of a U.S.-China agreement last fall under which China, as a condition for entering the World Trade Organization, made major concessions in reducing tariffs and opening its markets.
Part of the agreement calls for China to allow greater outside ownership in the telecommunications industry.
The original deal includes a commitment by China to allow foreign companies to own up to 49 percent of a Chinese telecom venture, and then up to 50 percent two years later.
However, there's no certainty, for example, that Beijing will force its second biggest telecom company, China Unicom, to swim in the same waters as telecom sharks from overseas.
``There are concerns about limitations on joint venture partners, about whether foreign companies will have to have certain capitalization levels to invest in China, and whether there will be price controls on telecom services,'' said Joanne Thornton, a foreign trade analyst for the Schwab Washington Research Group. ``All of those things will be answered in one way or another once China enters the WTO.''
While Unicom happily helped itself to the free-market pleasures of Wall Street, raising nearly $5 billion in June with an initial public offering of stock, the company is still 75 owned by state-run China United Telecommunications Ltd.
In the past, thanks to those bloodlines, Unicom has enjoyed the right to offer discounts of up to 60 percent from government-set price levels.
SBC Communications, the local phone company for most of the Southwest and Midwest, boasts one of the biggest portfolios of overseas ventures among the nation's top telecom players, but continues to emphasize more predictable countries and regions. For now, SBC's sole Asian operation is a wireless venture in Taiwan.
``We have focused in the immediate term on building out our European footprint as well as our Americas backbone,'' said Saralee Boteler, a spokeswoman for San Antonio-based SBC.
``That's not to say that Asia doesn't interest us and China doesn't interest us,'' she said, noting a company estimate that 20 percent of all calls to Asia originate in SBC's local U.S. markets. With the rapid growth of Internet and other data communications, ``I'm certain that two-way traffic between our territory and Asia will become more of a focus. But how that focus plays into overseas investments has yet to be determined.''
AT&T and WorldCom, both active investors overseas, have yet to suggest any concrete plans for a foray into China.