China Netcom urges action on 3G licences

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China Netcom, the country’s second-largest fixed-line operator, called on the Chinese government to award third-generation mobile licences by March 2007 to ensure that the service would be ready for the 2008 Olympics in Beijing.

“I think the government should issue licences in the first quarter of next year at the latest. This should not drag on any more,” Zuo Xunsheng, chief executive, told a group of reporters in Hong Kong.

Mr Zuo’s comments come as investors in China’s telecoms sector are becoming impatient with the government’s failure to present a timetable for introducing the networks. Mr Zuo is the first head of a Chinese telecom group to talk openly on the subject.

Beijing officials, who for the past few years have been mulling the introduction of 3G, have indicated a wish for the new networks to be in place in time for the Olympics. The government’s silence on the exact timing has meant that Chinese telecoms groups tend to be cautious about revealing their investment plans for building 3G networks.

There is also concern over the type of 3G technology that will be introduced in China. Regulators are widely believed to want at least one of the big four operators to adopt the government-backed TD-SCDMA standard instead of rival technologies popular in Europe and the US.

The introduction of 3G would help Hong Kong-listed Netcom return to growth, as the company’s core fixed-line business has been slowing as more people switch to mobile phones. In the first-half of 2006, Netcom’s net profit dropped 1.7 per cent to Rmb5.76bn ($722m). Turn-over rose 2.2 per cent to Rmb41.85bn.

Quoting industry estimates, Mr Zuo said building a national network would cost between Rmb80bn and Rmb100bn over three years.

He said Netcom might enlist strategic investors, such as Telefonica of Spain and PCCW, Hong Kong’s dominant telecoms operator, for its 3G business. Telefonica already owns 5 per cent of Netcom and is expected to increase its stake to 10 per cent by the end of this year.

Netcom is PCCW’s second-largest shareholder with a 20 per cent stake. The pair were locked in a dispute this year over whether PCCW could sell its core fixed-line assets to foreign investors.

Mr Zuo yesterday reiterated that Netcom did not want to see any changes in PCCW, which is “owned and managed by Hong Kong people”.

But he said that Netcom would welcome investment by foreign groups as long as Hong Kong people remained as controlling shareholders.

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