China Netcom Group Finishes Restructuring Plan
The China Netcom Group, which was formed after being
broken off from China Telecom, has nearly completed a
20-month restructuring, and is now ready to compete in
China Telecom's former markets. This now places the two
companies as the number one and two fixed line carriers
in China.
Under the restructuring plan, the group's operations
will be divided into three business units along geographical
lines. The plan also addresses a conflict with the Netcom
Group's subsidiary, better known as Little Netcom, with
which it used to compete. Under the plan, two wholly owned
subsidiaries, Netcom North and Netcom International, will
take over operations which are separately run by Netcom
Group and Little Netcom. Netcom North will control the
carrier's assets and operations in 10 northern provinces,
and will continue in its present role.
Netcom South will take over 15 regional branches in 21
southern provinces, which are now monopolized by China
Telecom with its wireless business. Seven branches are
now owned by Little Netcom.
Netcom International will be set up in November, and
will absorb business and assets which are now run by both
Netcom Group and Little Netcom. It will be the only company
authorized to do international business on behalf of the
Netcom Group.
It is now yet clear how Little Netcom's existing shareholders
will be compensated for their shares.
The Netcom Group was formed last year on order of the
central government when China Telecom was split into two
units along geographical lines. China Telecom kepts its
fixed line assets in 21 southern provinces, while 10 northern
provinces were taken over by the Netcom Group. The Netcom
Group was also ordered to merger with smaller Internet
protocol carriers Little Netcom and Jitong
Network Communications .
The purpose of the split was to encourage the two companies
to compete in each other's markets, and to offer better
service to business and consumers.
In August, China Telecom began offering services in Beijing
which is dominated by Netcom. The Netcom Group also began
offering services in Shanghai, which is China Telecom's
base.
The Netcom Group has been granted a 55 billion yuan loan
by the State Development Bank to finance the restructuring,
and to cover future mobile network construction costs.
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