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Sino-Russian Mahjong [24.09.07]

Sino-Russian cooperation in telecom sphere is evolving in China’s favor.  Large Russian telecom groups backed by the government started their China pitch back in 2001.  At that time North-Western GSM (currently MegaFon, Russia’s third largest mobile operator) asked the Russian government to assist in obtaining Chinese license for mobile services.

Furthermore, from 2001 to 2006 the Russian government tried to convince its Chinese counterparts to allow Russian companies into mobile sector.  And these were some heavy lobbyists, including the then-Chairman of the Russian government Ilya Klebanov (2001); Vice Premier Viktor Hristenko (2002); Boris Antonyuk, Deputy Minister of Information Technologies and Communication (2006); Leonid Reiman, Minister of Information Technologies and Communication (2006); and even Russian President Vladimir Putin. 

According to Vedomosti, the latter said during his China visit in March 2006, “received affirmations that the Chinese side will try its best to solve this problem in the nearest future.”  And the Chinese President Hu Jintao promised to assist Russian operators and define the conditions for Russian operators’ entry to the Chinese mobile market.  Yet despite this active and representative pressing nothing has moved. 

I asked various ministry officials directly about this issue during my June visit to Beijing, but unfortunately, no one was able to offer any sensible explanation.  One of the platitudes that I heard was that  “the Chinese side is very interested in developing relations with the Russian side in all directions, including mobile communications.”

Other analysts advised me differently.  A representative of one of the largest western newspapers, who wanted to remain anonymous, said that “there is a huge line of large global operators with significant capabilities and most importantly with solid global experience, waiting to get a cut of the Chinese mobile pie.  Really, at this point Russians have little chance both in mobile and in fixed sphere, what can they offer that Vodacom can’t?” smiled the guru.  

Diverting from mobile communications, I asked why Chinese operators still send their traffic to Europe via undersea cables, instead of the shortest route via Russia by TransTeleCom or Rostelecom pipes.  Wei Leping said that “traffic through the undersea cable has been done for many years” and it does not mean an ignorance of good alternatives.  “We are going to develop a Russian route as well, and especially so after we learned the devastating lessons of Taiwan’s earthquake in 2006.”

Presently, Russia’s three largest telecom carriers, Rostelecom, TransTeleCom and MTT are successfully working with China, and signed agreements with China Telecom and China Netcom.  Both Rostelecom and Transtelecom have a point of presence in Hong Kong.  MTT signed an agreement with China Netcom in Hong Kong during the ITU Telecom World in 2006. 

However, the major Chinese mobile and fixed telcos are not planning to develop their business in Russia.  “We have no plans to invest in the Russian fixed telecom market, as we have plenty of work to do in China,” smiles Wei Leping of China Telecom.  “Naturally the development of a steady business relationship with major Russian carriers has good prospects, and we are upbeat about our future.”  Mr. Jidong Zhao, Senior Vice President of China Netcom and Head of Communication Department for the Olympic Games, also said that China Netcom is currently involved in a range of key domestic projects, and is not planning any investments abroad.  Gloria Zhang, China Telecom Deputy Managing Director, added that the Asian traffic growth will only continue to grow in the next few years,” which means that “Russian-Chinese cooperation in this sphere will only increase.”