China's telecoms industry is achieving dramatic development, propelled by its accession to the World Trade Organization (WTO).

"The accession into the world trade club has contributed a lot to helping China accelerate its telecoms sector," said Zeng Jianqiu, a professor with Beijing University of Post and Telecommunications.

Figures from the Ministry of Information Industry (MII) show that by the end of September this year, revenue from the telecom industry reached 386.2 billion yuan (US$46.53 billion), up 12.8 percent from the same period last year.

Meanwhile, it has signed up 306.9 million fixed-line subscribers and 320 million mobile subscribers. Broadband users top 20.6 million.

Zeng said he believed that the booming industry would be likely to maintain strong growth momentum for years.

"The accession, in fact, helped domestic telecoms operators speed up their readjustment in the past three years to become more competitive," he told China Daily.

China's major telecoms operators have all undergone reshuffles to become tradable in the market. They include China Mobile, China Unicom and China Telecom.

China Netcom started to trade in New York last Tuesday and Wednesday respectively.

"If there was no WTO accession, the steps might not have been so fast," he said.

"After three years, we have reached a post-WTO time when fiercer market competition between domestic and foreign firms will become dominant in the market," he said.

He said he believed in the first three years that many foreign telecoms giants were watching the telecoms market and waiting for the right time to enter it.

"With the gradual lifting of restrictions on foreign involvement, foreign penetration in the telecoms industry is expected to speed up," said Chen Jinqiao, director of the China Academy of Telecommunications Research of the MII.

China is to fully lift regional restrictions on value-added telecoms services to foreign investors this year, according to China's commitment to the WTO.

Foreign shares can take no more than 49 percent in joint ventures in mobile voice and data systems without regional restrictions.

Meanwhile, foreign investors are allowed to set up joint ventures in Shanghai, Guangzhou and Beijing to deal in domestic and international fixed-line businesses with their shares set at a maximum 25 percent.

"We will keep our commitment to relevant WTO rules to open up the information and communication technology market accordingly," said Minister Wang Xudong of the MII in September during the Pacific Telecommunications Council (PTC) Mid-Year Seminar 2004 in Tianjin.

He said the country would make policies more optimized and transparent so as to protect the interests of foreign investors, as well as attract more investors to China.

"Starting next year, foreign involvement in the domestic telecoms sector might see a boom," Zeng said.

Fuelled by the enormous market potential, already many overseas companies are carving out niches in the market, including Vodafone, AT&T, British Telecom, Japan Telecom and Hong Kong's PCCW and Hutchison Whampoa.

France Telecom, for example, has set up a wholly-owned research and development (R&D) facility in China, as a step towards paving the way for future expansion in the world's biggest telecoms market.

The French telecoms giant opened its Innovative Gardens early this month in Beijing's Zhongguancun area, the Silicon Valley of China.

"This allows us to become one of the first foreign telecoms operators to set up an R&D centre in China," said Pascal Viginier, executive vice-president of France Telecom Group.

He said the facility would focus on innovation terminals; Linux open-source technologies; speech and natural language processing; TD-SCDMA (time division synchronous code division multiple access) and B3G (beyond the third-generation of mobile communications); telecoms applications, value-added services, and multimedia services; and monitoring of technological development in China.

Australian telecoms firm Telstra plans to tap the potential in the market with the opportunities of the 2008 Beijing Olympic Games and the further opening up of value-added services in China.

Brian Pilbeam, president of Telstra Asia says he believes that China is the most exciting telecommunications market in the world.

Pilbeam said Telstra will seek to form joint ventures or partner with domestic firms to tap the potential in the Chinese market.

"With the entry of foreign participants, domestic telecoms-related operators should form alliances to fight against them," Zeng said.

"At least, domestic telecoms firms should be aware that with foreign players the competition in the market will become even more intense," he said.

The major focal points of competition in the domestic market is now mainly among domestic operators and telecoms equipment providers.

Overmuch network redundancy and price wars would only harm to telecoms industry, he said.

In post-WTO time, the Chinese operators should join to fight against foreign players, he said.

"The reason foreign players seemed not very active in the market in the past three years is because they are preparing for it," he said.

He attributed the slow entry partly to the sluggish global telecoms industry in the past few years.

Also, China's measures have protected domestic telecoms operators from international competition in the domestic market in the early stages of the WTO accession.

"But with the recovery of the world telecoms climate and the lifting of related restrictive policies, competition will be extremely fierce," he said.

If the correct preparations are properly carried out, the impact of the WTO on telecoms will become more and more conspicuous, he said.

Chen said he believed that value-added services would continue to become one of the most favored areas for foreign telecoms companies.

Also, 3G, NGN (next generation of networks) and IPv6 will become the main competition areas for larger market shares.

"In fact, the whole range of telecoms-related businesses will become the targets of foreign players given the size of the Chinese market," he said.

He said he believed ways of participation into the China's telecoms industry could be varied. These included purchasing shares of major telecoms operators, establishing joint ventures with domestic firms and forming research and development centers with Chinese counterparts.

Chen said that a more sound environment characterized by transparent policies and a good legal environment was badly needed to attract more foreign telecoms operators to China.

The Chinese Government is presently working on telecoms law, and it is reported that the law will be issued next year.

"Telecoms law is very important to ensure the healthy development of the sector," he said.

He said that the telecoms law should be internationalized as the sector is aiming to build up international giants.

(China Daily November 23, 2004)