Paris-based Alcatel will raise its stake in SBC, the country's largest maker of telecommunication networks, to a fraction more than 50 percent, from 31.65 percent, by buying stakes from the Belgian and Chinese governments.

Alcatel's 10 joint ventures in China, including its key businesses - Alcatel China, Shanghai Bell and Shanghai Bell Alcatel Mobile Communication - will be consolidated to form Alcatel Shanghai Bell (ASB), converting the joint venture to a company limited by shares.

"All of Alcatel's other telecom subsidiaries in China will be integrated into ASB within 24 months of its establishment," Alcatel Chairman Serge Tchuruk said on Tuesday in Beijing. It plans to double the number of engineering staff in China to 3,500 during the next three years, making a total number of staff of 6,500, he said.

ASB is also expected to become one of Alcatel's major global research and development (R&D) centres. Core technologies to be developed by ASB for domestic and global markets include next generation fixed and mobile networks.

"We are creating Alcatel Shanghai Bell to be the market leader in China, and build the Asia-Pacific region as a strategic centre of Alcatel's worldwide business," he said.

The Asian region contributed just 7 percent of the company's sales last year but the figure is expected to increase by 50 percent this year, company officials said. In five to six years, Alcatel predicts Asia will account for a third of its sales.

Alcatel expects ASB to export more than US$1 billion in its first three years and achieve US$2 billion sales in the first year, according to a company statement.

ASB may go public in China in the future, as "the legal structure of a company limited by shares allows ASB the flexibility to be listed," Serge Tchuruk said in the statement.

Ron Spithill, president of Alcatel's Asia Pacific rim, said Alcatel may set up its first Asian Optronics plant to manufacture high-end components for terrestrial networks. Although he didn't reveal how much will be needed for the factory, industry insiders said it could cost between US$70 million and US$100 million.

The Ministry of Information Industry (MII) and Alcatel signed a memorandum of understanding on Tuesday to mark the creation of the new company.

"Alcatel is the first global company with the vision to open up its global technology to a Chinese company," Wu Jichuan, minister of MII, said. "Establishing ASB will contribute to the development of world leading telecom technologies in China."

The acquisition is the second in three days in China's telephone equipment market. On Monday, Emerson Electric Co said it paid approximately US$750 million to buy China's biggest maker of power supplies for telephone networks from Huawei Technologies Co.

(China Daily 10/24/2001)