China Telecom Prepares to Go Global
Facing increased competition in the China home market
from China Unicom and China Netcom, and falling average
revenue per user (ARPU) in the China domestic market,
China Telecom is quietly planning to enter other emerging
markets as a major player.
The first major market China Telecom is making a move
into is Indonesia. China Telecom is currently in talks
to buy a 60 percent stake in Excelcomindo, Indonesia's
third largest mobile phone operator. It is believed that
China Telecom is in talks to buy the stake from the Rajawali
Group, which has ties to Bambang Trihamojo Suharto, a
son of the former ruler of Indonesia. Suharto was forced
to step down following the Asian currency crisis.
Privately-owned Excelcomindo currently has 2.5 million
subscribers and 15 percent of the Indonesian mobile market,
putting it behind Telkom and Indosat. In May 2002, the
company agreed to a restructuring of its US$379 million
in debts, and is searching for capital to strengthen its
network.
Like other major state-owned enterprises in China, China
Telecom is leveraging its cash reserves and experience
in a major global market to expand into other emerging
markets. China was relatively sheltered from the Asian
financial crisis, but Indonesia was badly hit, and lately
has also been affected by Islamist terrorist bombings,
especially the Bali bombing of October 2002, which killed
more than 200 persons, mostly Australian tourists.
On China Telecom's website, the company has stated that
2003 is the "year of large-scale development of the
China Telecom international network". China Telecom
is currently believed to be in talks with a European consortium
of telecommunications operators, including BT Group and
Deutsche Telekom, to purchase international cable capacity
along the Atlantic coast in a deal valued at US$1 billion.
There is now a vast surplus of excess cable capacity
left over from excess buildout in 2000 and 2001. It is
believed that China Telecom will be able to acquire the
capacity at prices between one-fifth and one-third the
original construction cost.
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