China Telecom/China Netcom agree non-intrusion pact

Details: Alec Barton; Category: Trends & Forecasts; 05 March 2007; 10993 views

China's north-south telecoms divide has become more pronounced with the news that China Netcom and China Telecom will not look for business opportunities in each other's 'territories.'

This decision reinforces a recent major transaction involving China Netcom.

Reports from Beijing have suggested that two of China's most important telecoms players have agreed not to intrude on their respective geographical 'territories.' The bottom line of the agreement is that China Telecommunications Corporation (CTC), which is predominantly a south-China oriented operation, will not try to attract business from the northern provinces of China, while China Netcom Communications (CNC), which started its life in ten of the country's northern provinces, will respect CTC's southern business operations.

Observers of Chinese telecoms will perhaps not be surprised by this agreement for at least two reasons. In January China Netcom disclosed that its southern assets in Shanghai and Guangdong were in line for sale to CTC (a figure in the region of US$452 million was discussed).

An even bigger clue lies in the history of the two companies. Five years ago China Telecom's China-wide monopoly was broken up. There was a spin-off from it - China Netcom Communications Group, parent of China Netcom...

Quite how long this arrangement will last is not clear but both parties mean it - no marketing, no installing broadband, fixed line, or smart phones in the other's area, no cultivation of major private- and public-sector entities. Even broadband subscribers will see their IP addresses exchanged as required under the deal.

More stable market share for each company? Yes. More rational competition? Yes. But only between the two. What about other operators? One wonders what the response of the Beijing Government will be.

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