"Split it up or save it, the government should do it quickly, as the long wait has damaged the healthy development of China Telecom," said a senior official with the fixed-line giant, who preferred to remain anonymous.

China Telecom's nightmares began in May, when the State Council tentatively decided to reform the fixed-line telecom business, by breaking it down into smaller segments.

The healthy operation of the company was severely hurt by indecision on the part of relevant authorities, as investment plans halted, and some employees -- worried about their future -- jumped to more well paid companies like China Mobile and China Unicom.

The important projects that needed large sums of money stopped, as China Telecom did not know whether the projects would still be viable for it several months later.

As the country's biggest telecom equipment buyer, China Telecom's hesitation in purchasing influenced the equipment vendors, software vendors and all the related service providers. The official stated, as China Telecom controls approximately half of the country's total telecom revenue, its decision will surely influence the whole industry.

"No matter what the government do, it should do it quickly," he said.

According to Wu Jichuan, minister of the information industry, his ministry is not involved in the decision-making team for the China Telecom case.

China Telecom used to be a government bureau and has deep relationships with the industry watchdog, the Ministry of Information Industry (MII).

The MII handed in the plans for reform to the State Council, which includes the regional splitting, business splitting and no change proposals.

The giant fixed-line operator started life on May 17, 2000, when the original telecom conglomerate was divided into four parts: paging; mobile; satellite and fixed-line. China Telecom inherited the name and the fixed-line business, and expanded the user-base to 160 million.

With increasing complaints to China Telecom for its monopoly in the fixed-line business, the State Council is now considering splitting it up into small parts by businesses, or north and south regions.

Industry insiders had earlier forecast the reform plan would be announced in mid August, but that date is likely to be postponed.

China Telecom had picked up Morgan Stanley Dean Witter, Merrill Lynch and China International Capital Corp to be its underwriters for the overseas listing.

But the listing was delayed because of the internal structure adjustment.

"Despite being very much on track for the IPO (initial public offering) preparations, I do believe there will be a delay," said Mario Francescotti, president and managing director of Morgan Stanley Dean Witter Asia Ltd.

He said the IPO is likely to be postponed to next year.

Last week, China Telecom, influenced by the uncertainties, reported a unsatisfactory first half year operation result.

The revenue growth of China Telecom significantly slowed down to 5.8 percent in the period, much lower than the industry's average of 14.7 percent.

The official said China Telecom felt ashamed as this is the first time its growth rate is lower than the gross domestic product (GDP) growth at the time.

China's GDP grew by 7.9 percent in the first half of the year.

(China Daily 08/20/2001)