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Regulatory uncertainty in China's telecommunications industry has deterred potential foreign investors from buying stakes in China Netcom, according to Edward Tian, chief executive of the telecoms group.
Mr Tian said Spain's Telef?nica was the only international telecoms group that had the ?courage? to invest in Netcom, the country's second-largest fixed line operator, after it talked to other operators including Singapore Telecom, Korea Telecom and Japan's NTT.
?They were concerned about the uncertainty in the industry restructuring. They did not have the guts,? Mr Tian said in an interview.
?This is my own judgment but I think it is a fact too. If you make an investment, you have to calculate whether you could take the risk.?
China's telecoms industry is expected to undergo a significant reshuffle ahead of the introduction of 3G services, with some analysts predicting Netcom could merge with China Unicom, the country's second-largest wireless operator.
The central government has shed little light on the details of the restructuring so far. Mr Tian also denied reports in the Chinese media that he was quitting Netcom as part of the company's reorganisation.
Meanwhile, foreign telecoms groups have limited presence in China. Vodafone of the UK has a 3.3 per cent interest in China Mobile, the biggest wireless operator, although the tie-up ?has produced very few tangible synergies and value creation between the companies?, said Jason Billings, analyst at Goldman Sachs, in a report.
But Telef?nica, the world's third-largest telecoms group which bought a 2.99 per cent stake in Netcom for ?240m ($290m) in early July, said it was not concerned.
?Uncertainly is always there. Who was going to tell us three years ago there would be a revaluation of the renminbi? We have to have flexibility, ? said Mauricio Sartorius, Telef?nica's chief representative in Beijing.
Mr Sartorius said Telef?nica's investment in Netcom was for the long term. The group decided to invest in China for its vast potential in broadband and mobile, although Netcom does not have a mobile licence yet and China has not said when it would issue 3G licences.
?We just have to have our ears open. We have to share our experiences with Netcom. At least when they get a licence, we have done something already. You cannot wait to do things,? he added.
Telef?nica, which has for some time been seeking to expand into China, signed a memorandum of understanding with Netcom last week to form a strategic alliance and explore opportunities in China.