$50M Helps Launch China NetCom

Electronic News, Nov 15, 1999 by Richard Bruner

Four Chinese government agencies will launch the nation's fourth telecommunications network, China NetCom, with a $50 million capital infusion from the central government. The new launch could mean a big opportunity for U. S. makers of dense wavelength division multiplexing (DWDM).

For Lucent Technologies, which has sold more than $650 million worth of optical networking systems to Chinese telecommunications systems and is a major manufacturer of DWDM systems, the new Chinese company undoubtedly represents a great opportunity, according to a Lucent spokesperson.

"We are very excited about China NetCom," Hing Tong Kung, Lucent's Bejing-based staff director, told Electronic News. "Its creation represents a further liberalization of the telecom market, which will present tremendous opportunities for Lucent."

Hui Pan, chief economist, Information Gatekeepers Group of Boston, agrees. "I think the opportunity will be pretty huge for equipment suppliers," said Pan, who tracks the Chinese telecommunications and electronics industries. "It will be mostly for infrastructure telecom equipment suppliers. DWDM will be needed. No other system will be able to provide the capacity," for the 20Gbyte Internet network being built by the new company. It will link China's 15 biggest cities, all in the eastern part of the country, including Beijing, Shanghai, Guangzhou and Wuhan. In the future, according to Pan, the network "will be capable of connecting 150 countries. In addition, roaming service will be available for users between the cities with Internet Protocol phone services."

The company president is Edward Tian, who announced the network should be finished by the end of next July. Tian, who was educated in the United States, left his job as chairman and president of AsiaInfo to lead the new company. AsiaInfo, which he helped create in 1993, developed system integration methods for IT in China. The new company will be profitable by 2001, he said in his announcement.

Equity in the new company is equally divided among the Chinese Academy of Sciences, the Shanghai city government, the Ministry of Railways and Administration of Radio, Film and Television. Each has one seat on NetCom's board. Although the government's investment of $50 million is "not big start-up seed money," said Pan, the company will be able to use the "entire cable TV infrastructure, controlled by the Administration of Radio, Film and Television." He added that the hard-wired infrastructure "is the largest cable TV network in the world with 80 million cable-TV subscribers."

China NetCom becomes the fourth telecommunications carrier in China. The others are , Unicom and Ji Tong. The Chinese government prohibits foreign investment or affiliation in the telecommunications industry. Recently, the country's Information Minister Wu Jichuan told a business forum that China will open its Internet sector to foreign investment "sooner or later."