Foreign investors in China get telecoms go ahead

BEIJING: China has relaxed access for foreign investors to its booming telecommunications industry by cutting minimum required investments, but retained a ban on foreign majority ownership of ventures.

The Cabinet decision Friday could help to attract new investment into an industry that is undergoing a sweeping government-mandated restructuring aimed at boosting competition.
The minimum capital required for a foreign-financed company to offer national-level or local basic services was cut by 50 percent, according to a notice on its Web site.

But the Cabinet retained a restriction limiting foreign investors to owning no more than 49 percent of a company offering basic services and 50 percent for value-added services.
The change could help new, small Chinese businesses by giving them easier access to foreign financing, increasing competition and speeding innovation.

It cuts minimum required capital for a foreign-financed company offering basic services at a national level to 1 billion yuan (US$145 million) and at a local level to 100 million yuan (US$14.5 million), the announcement said.

The industry overhaul, announced in May, is meant to revive competition by rearranging state-owned phone companies into three large groups, each with mobile and fixed-lined operations.
Chinese customers are flocking to mobile services, which has turned China Mobile Ltd., the dominant carrier, into the world's biggest phone company by subscribers.

By contrast, the major fixed-line carriers, China Telecom and China Netcom, have seen subscriber numbers fall and are struggling to attract new customers.
China Mobile says its profits for the first half of this year surged 45 percent over the same time last year as customer numbers soared.

The launch of third-generation, or 3G, operations that support Web surfing, video and other services is expected to boost growth in mobile revenues still further.

Spain's Telefonica SA said last week it would spend 800 million euros (US$1.2 billion) to expand its holdings in Netcom and China's No. 2 mobile company, China Unicom Ltd., which are due to merge. Telefonica said the investment would make it the combined company's biggest shareholder, with a 5.5 percent stake.


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