China Netcom Group Buys Jitong Communications
China Netcom Group, China's third largest telecom group,
has agreed to the purchase of Jitong Network Communications
for RMB481.9 million yuan, or US$58.2 million.
Jitong shareholders will receive payment of one dollar
for each dollar invested in Jitong.
This marks a further step along in the Chinese government's
rationalization of the Chinese telecom industry. China's
state council laid down a plan for the integration of
the assets of China Netcom Group, Jitong Network Communications,
and China Netcom Corp, which is also known in China as
Little Netcom.
Because the telecom industry is a capital intensive industry
which has relied heavily on state funding, China's state
council plays a heavy deciding role in policy, working
through the powerful Ministry of Information Industry
(MII). MII is the regulator of the telecom and Internet
industry, sometimes going as far as appointing government
officials to company positions and setting fees for the
industry.
In late April, MII appointed Zhang Chunjiang, a former
MII vice minister, as the new head of China Netcom after
it had made little progress in integration. Of China's
four telecom groups, China Netcom is the only firm which
is not yet listed, and it is believed that successful
integration is an important milestone before China Netcom
goes public. The former general manager of China Netcom,
Xi Guohua, took Zhang's former job at MII.
In May 2002, China ordered the breakup of former fixed-line
monopoly China Telecommunications Corp into two entities
- China Telecom Group and China Netcom Group. China Netcom
Group took over China Telecom's assets in 10 provinces
in northern China. China Netcom Group was also ordered
to merge the assets of two major broadband providers,
China Netcom Corp. and Jitong. However, both are still
operating independently.
The number of fixed line and mobile phone subscribers
are approximately the same now in China, with between
225 and 230 million users each as of April. Mobile subscriber
growth slowed to 4.23 million for the month of April.
Recently, fixed line growth has grown slightly faster
than mobile user growth.
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