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Telecom Ping-Pong in Virginia [19.07.08]

When I traveled to Beijing last June, it was not the Beijing I remembered. Back in 1990, the streets were flooded with heavy bicycle traffic, the “Friendship Store” was the only place in town where we could buy our croissant and salami supplies and telephone connection was unbearable.

Seventeen years had passed and I couldn’t believe my eyes! It was a totally new city with ubiquitous skyscrapers, ever growing car traffic and huge construction sites. On top of all these infrastructure upgrades Beijing has also become China’s telecommunication hub connecting hundreds of millions of subscribers in its massive broadband networks.

When I walked in to one of the many Internet cafes around the city, I was stunned by the number of people pounding at their keyboards and shouting at their Skype phones. Moreover, everyone had at least two mobile phones which kept buzzing with modern ringtones.

Beijing will become even more connected by August 2008, when the first “broadband Olympics” will be officially launched. Chinese telecom operators are set to offer a wide spectrum of mobile applications including live broadcast of the Games, mobile multimedia services, blogging for journalists, video conferencing services and mobile video-monitoring.

According to Mr. Bill Barney, Asia Netcom President, “at the Beijing Olympics in 2008, everyone expects revolutionary traffic explosion, as thousands of reporters and journalists will be able to send their pictures or videos ‘live’. This didn’t happen even in Athens!”

The changes in China’s growing telecom sector are truly amazing. In 1990, China had only 6.87 million fixed line and 2 million mobile service subscribers. By the end of 2007, China had become the world’s largest fixed telecom and mobile market with 350 million and 600 million subscribers respectively!

Today China is second only to the United States in terms of its broadband growth. According to Mr. Jiang Yaoping, Vice Minister of Information Industry, as of June 2007, there were over 137 million Internet users, including 97 million broadband users. China Telecom (CT) is one of the largest fixed telecom operators in the world. It is also the first in local access capability and international capacity in China.

No wonder I was thrilled to visit the China Telecom Americas office located in Herndon, VA. The company’s President and CEO Donald Tan hosted me and a group of The Washington Center’s interns and offered a comprehensive outlook on the Chinese telecommunication industry and CT’s dynamic local and international business.

CT was established in May 2002 after a split from the former CHINA TELECOM into two groups: CHINA TELECOM (southern provinces) and CHINA NETCOM (north provinces). Later in November 2002, CHINA TELECOM Corporation Limited completed listing its shares at NYSE (NYSE:CHA) and HKSE (HKSE: 728) for IPO.

According to Tan, CT has the longest fiber network in China with a total length of 1.23 million km. It also has the largest local access capability, owning 2/3 of China’s fixed line infrastructure. In 2007 China Telecom Corporation’s annual revenues surpassed USD 24.6 billion, while its total assets reached USD 64 billion. The company employs over 400,000 people.

Fueled by its dominance in China, CT has launched a global offensive, opening offices in Singapore, the U.K. and the U.S. Currently, the wholly owned US-based subsidiary of China Telecom Corp. Ltd. has affiliate offices in Boston, Chicago, Houston, Los Angeles, Miami (coming soon), New York, San Jose, and Toronto, Canada.

CT provides Data, IP and Voice Wholesale services to organizations requiring China domestic services and International access to China & Asia Pacific. The company’s main differentiator, according to Dr. Tan, is its competitive service offering of locally based, one-stop-shop, turn-key telecom service solutions. The company is licensed to sell domestic China telecommunication services in North and South America.

Luis Fiallo, Managing Director, continued the presentation, explaining macroeconomic and global trends and their influence on the telecom industry in general. Fiallo believe that current shifts in the global economy, balance of trade, aging workforce and emerging new consumer landscapes changing the ways the industry operates. New emerging trends, like Web 2.0, mushrooming social networking sites, and mobile interconnectedness have created a new “borderless ecosystem.”

Consumers demand converged networks, where voice, data, video and real-time applications come in one bundle. Everyone is craving seamless services, in which geographic and physical boundaries don’t interfere with the quality of connection. At the same time, operators face decreasing profit margins, despite intensive capital injections. There is a tight competition in major international and emerging markets.

How can an operator survive in these conditions? The only answer to these challenges is to provide outstanding customer service, asserts Fiallo. Therefore, the company has concluded cooperative agreements with scores of major corporate customers in the U.S.