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Charlie Zoi, Telstra's Director of its International section, gives his view on the opportunities in China's nascent telecoms explosion

How long has Telstra been involved in China? What would you say are your strengths in the market and who would you see as your main competitors?

The forerunners of today's Telstra have been providing telecommunications services between Australia and China since late last century. In the sense of being on the ground in China, Telstra has had an office in Hong Kong since 1989 and Beijing since 1995.

Telstra has a number of strengths which stand it in good stead in the Chinese market. As an international service provider, it's important that Telstra is one of the largest full service carriers in the Asia-Pacific with services to more than 250 countries and territories. Our global network is supported by substantial investments in submarine cable systems and major shareholding in INTELSAT (International Telecommunications Satellite Organisation) and INMARSAT (International Mobile Satellite Organisation).

As part of its global business strategy, Telstra is aggressively positioning itself as an Asian Communications Service Integrator and Operator with experience in the Managed Network Services (MNS) and Facilities Management (FM) business in Australia; and MNS and FM resources and expertise across major Asian cities.

Telstra's offshore business strategy has an emphasis on China, Indonesia, Vietnam and India but also covers businesses in Cambodia, Laos, Sahkalin, Kazakstan, Kiribati and Sri Lanka. To broaden the extent of services available to customers, Telstra has offices outside of the Asian region - in New Zealand, the UK, and USA - with a primary focus on MNCs.

As a result Telstra can be of great assistance with the establishment of telecommunications services for multi-national clients setting up offices and businesses in China. Following on from agreements we've reached with Chinese authorities, Telstra can now provide One Stop Shop private line services in both Beijing and Shanghai. This is something which few other operators can offer. Also, Telstra will be able to offer GSM roaming in China from July this year.

Most of the international telcos are in China to build relationships in order to be part of China's growth into one of the economic super powers of the 21st century. Against this challenging field, we believe Telstra is well positioned to play a significant role in the development of telecommunications in China. We have spent a great deal of time and energy to understand the environment and forge relationships with those entities which will be significant players in this sector. This has represented a major investment in resources, both in terms of money and people.

Telstra's key strengths as a development partner would be its experience as a large integrated operator; its track record as a long term partner in significant JVs in Asia; its independence from equipment suppliers and a willingness to listen and give project owners what they want. It may seem obvious to some but it's worth stressing that Telstra is an operator, carrier and service provider, not an equipment supplier. This gives our project partners confidence that we are giving them objective advice drawn from our own experience, not a recommendation based on commercial ties.

"China does not have to catch up with more developed economies in this field ...she has the ability to leapfrog to the forefront of telecoms technology"

Another advantage Telstra has is that we understand and support China's right to deregulate telecommunications in its own way and at its own pace - we are not here to force open the market but rather to work with China within the bounds of a policy framework with which the Chinese feel comfortable. Through its experience of joint ventures in many parts of Asia, Telstra has developed a sensitivity to the needs and rights of other cultures. A good example is our operations in Vietnam which are based on a Business Co-operation Contract developed to take account of the particular needs of the Vietnamese economy.

Can you outline the state of the telecoms market in China? How developed is it and where is it heading?

The telecommunications market has developed at an amazing rate over the last 5 years and this growth is likely to continue. Penetration rates are still low (especially in country areas) and service quality at times is a problem. This is to be expected given the rate of development being pursued. A telecommunications network the size of Australia's is being rolled out in China every nine months. China has set itself a goal of reaching a penetration rate of 10 per cent overall and 30 per cent in the cities by the year 2000. Given their past record of meeting the ambitious plans they set themselves, we have little doubt that the Chinese will achieve these goals. If we can help them, in a manner that is mutually beneficial, we're more than willing.

What part are foreign companies playing in the development of the telecoms infrastructure in China?

Current regulations prohibit foreign companies taking a direct role in the operations of telecommunications networks in China. Within this framework there is still room to explore a range of working arrangements and we have been discussing possibilities with a number of Chinese entities. Funding, technical assistance, systems integration, process deployment and service improvement are just some ways that we think Telstra could help.

What lessons have you learnt from your involvement with joint ventures in China?

So far Telstra's participation in JVs in China has all been at the negotiation and memorandum of understanding stage. The advice we would have for any company contemplating forming a JV is not to forget business principles just because you think you need to get your company into China before it is too late. We have always balanced the interests of our owner - the people of Australia - with the opportunity being discussed. There has to be a equitable split of risk and reward. Take whatever time is necessary to get to know your potential partner, their goals and expectations of the venture. The Chinese have a saying "same bed - different dreams" and it is surprising - or perhaps not so surprising given the rush with which some of them are established - how many ventures turn out differently to the foreign partner' s plans. Another obvious but often ignored need is to ensure that all the required Chinese authorisations are gained, from all levels of government.

The Chinese MPT aims to greatly increase teledensity and bring telecoms to every rural village by the end of the century. Can this be achieved and what opportunities do such plans offer to foreign companies?

Opportunities exist for foreign companies since there is only so much expansion that can be funded by 'traditional' means such as internal cash flow and debt and only so much technical expertise to be had internally at this relatively early stage of rapid expansion. By the MPT's own estimate, there is a requirement for around US$60 billion in capital outlay to meet the objectives of the ninth 5 year plan. That is a lot of money and some sort of equity participation by foreign investors is likely to be inevitable.

Why are the Chinese authorities so keen to greatly improve teledensity and what benefits do you think an improved telecoms infrastructure could bring to the Chinese economy as whole?

The Chinese authorities realise that infrastructure development is an essential element of economic development. Therefore China has plans to expand its infrastructure in a number of key areas including power, transportation and of course telecommunications. A modern telecommunications system that provides access for the majority of Chinese people is seen as an essential element of China's future. It's a common goal in Asia as governments grapple with the challenges of a globalising economy.

Given the pace at which telecom technology is evolving world wide, can China hope to catch up in the foreseeable future.

The beauty of the situation for countries such as China is that they do not have to catch up with more developed economies by an accelerated copying of their telecommunications history. Without an investment commitment to a comprehensive infrastructure network that may no longer be leading edge, China has the ability to leapfrog to the forefront of telecommunications technology which will allow China to more quickly meet its goals. For example, China intends taking advantage of the emerging technologies surrounding the utilisation of broadband networks for the delivery of telephony and other communications services.

The International Telecommunications Union has said that information infrastructures could help countries like China participate in new information economies. Given China's suspicion of the Internet, do you think the country will ever establish an information superhighway?

The Chinese Government is, like a number of western business heads and governments, attempting to reconcile the gap between the promise and the reality of the Internet. Much of the traffic carried on the Internet is irrelevant to the needs of an information economy and this is largely where most of the Chinese concern is centred. We believe that there are a number of ways in which China can make practical use of the Internet to provide meaningful information to consumers, business and government entities while avoiding unwanted consequences.

How important is the mobile telecoms market in China? Is it true that it is actually more developed than the wired telecoms market?

Modern communications systems around the world are making increasing use of wireless networks to provide customer access and China is no exception to this. There are currently around 8 million GSM services in China, up from 6 million in 1996. It would be an overstatement though to say the mobiles network is more developed than the wired network.

Chinese culture and business practices are well suited to the use of mobile communications and it seems the tremendous growth in mobile services will continue. In several years time the GSM (Global System Mobile) and analogue mobile technologies currently used in China will run into problems due to a shortage of available spectrum. The Chinese authorities would then most probably turn to the newer Digital Cellular System 1800 (implementation of GSM at higher frequency i.e. 1.8 gigahertz) and PCN (Personal Communications Network) technologies.

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