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March 1, 2007 12:18 am

China ‘ceasefire’ over fixed lines

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China’s two fixed-line telephone operators have sealed a deal intended to limit competition and leave each in control of its core markets, according to a company official and local media.

The deal between the parent companies of China Telecom and China Netcom highlights contradictions of interest inherent in the country’s state-controlled but foreign-invested telecommunications sector.

China’s four fixed-line and wireless operators were carved out of the former telecoms monopoly to create a competitive industry. All are internationally listed.

Many government and company officials have long been concerned that overly fierce competition and duplicated infrastructure construction limits profits and wastes state resources.

Government efforts to decide a plan for the introduction of 3G mobile telephone services have failed.

Local media reported this week that China Telecom, which operates the fixed-line telephone network in China’s central and southern provinces, had reached a detailed agreement to limit competition with China Netcom, its much smaller, northern-based rival.

“Such an agreement has been signed,” China Netcom said on Wednesday. “It is aimed at reducing malignant competition.” It declined to give further details of the pact.

China Telecom and China Netcom’s parent companies declined to comment.

Kan Kaili of Beijing University of Posts and Telecommunications, a long-standing critic of the division of the fixed-line monopoly by geography, said the deal marked a competition “ceasefire”.

“Telecom and Netcom both face a challenge from [dominant wireless operator] China Mobile,” Prof Kan said. “They feel they shouldn’t fight each other.”

While an agreement to limit competition could be legally questionable, it was unlikely to draw government ire, Prof Kan said.

An anti-monopoly law is planned in China.

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