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The Nation: China telecom companies look to region for expansion

08 August 2002

Routes to Markets

A multi-national corporation head-hunter talks to K I Woo about his clients’ views concerning China’s increasing foreign direct investment in the region.

During the past several months, leaders throughout the region have been openly speaking about how to deal with the oncoming Chinese economic juggernaut.

Just last month, a high-level trade mission headed by Finance Minister, Somkid Jatusipitak, traveled to Beijing and Shanghai .

Recently, Dr Supachai Panitchpakdi, who is scheduled to become thee incoming World Trade Organization (WTO) director general completed his best-seller, ” China and the WTO, Changing China, Changing world trade”.

Everyone, particularly the region’s political leaders are getting on the bandwagon and giving their far-ranging opinions.

Edwin Sim, the country manager of multinational corporation head-hunter, New York Stock Exchange listed Korn Ferry International said that many of his clients are telling him that China will be a big investor throughout the region in the near future.

“They are telling us to prepare for the next big wave of foreign direct investment in the region – only this time it will emanate from China ,” he said.

As recently as last week, news reports indicated that China ’s overseas investments in 2002 will reach a massive $US50 billion. Moreover, China ’s foreign reserve are fast approaching $US300 billion.

Although European telecommunications companies have expanded into the region during the past four or five years, Sim said his clients are telling him that European and more recently US telecommunications companies are battling problems at home. “The European telecommunications are expected to spend the next several years digesting the huge amounts of debt taken on to purchase 3G licenses,” he said.

Meanwhile the Chinese telecommunications industry is growing by leaps and bounds. An Australian telecom official told The Nation that Chinese telecommunications are building new mobile telephone platforms on a monthly basis equal to the total Australian system. “Remember that China has 1.2 billion people and many provinces have more people than all of Thailand ,” he said.

Expanding at such a rate, many industry observers expect that Chinese telecommunications companies will inevitably look overseas for more profitable expansion markets. “At some point in the near future, these companies will be looking for opportunities in the region,” Korn Ferry’s Sim said.

With their rapid expansion, China ’s telecommunications companies, Sim said are fast becoming world-class in building networks and providing new and innovative services. Moreover, China ’s telecommunication’s companies are now fast becoming among the largest in the world. ” China is estimated to currently has more than 130 million mobile phone subscribers,” he said.

Quietly, in the past few years, these companies have systematically built huge networks in the Middle Kingdom and several companies are already gargantuan by any standards. China Mobile, the country’s number two mobile carrier is already one of the world’s most profitable companies, earning more than $US5 billion per annum.

China Mobile’s imminent initial public offering is expected to raise billions of dollars and place the company’s market capitalization in excess of $50 billion. “At some point, companies such as China Mobile will have serviced all the profitable parts of their concessions, and will be looking to the region’s other economies for investment opportunities,” Sim said.

The Chinese telecom companies expertise gained by building huge efficient scalable state-of-the-art telecommunication’s platforms, Sim said can be leveraged profitably in higher income overseas environments. “Basically, it’s going to be a race for Asia among the Chinese telecom companies,” he said.

China’s mobile phone operators, Sim said are expected to be the key to the future development of South East Asia ’s telecommunication’s industries. “The huge Chinese companies will be expected to be the best position to capitalize,” he said.

The China market’s sheer size, its scale, critical mass and its new-found ability to tap the world’s capital markets, Sim said will earmark its fast-expanding companies as the next major telecom players in the region. ” China ’s telecom players have many of the ingredients which will propel them into being dominant players in the region,” he said.

In the immediate short-run, Sim said his clients tell him China’s huge and still-growing telecom players will be receivers of foreign direct investment but within a very, very short-period, China’s telecommunication’s companies, will look regionally for profitable expansion.

“Chinese telecom companies have the critical mass to conduct and amortize research and development costs over huge customer bases and develop scalable platforms which will transform the industry, regionally and globally,” he said.

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