Saturday, January 22, 2005

Another reason why China Netcom bought PCCW

I have to admit that I was a little conservative on the dealing between China Netcom and PCCW when I commented it yesterday. The story in Chinese) quoted from Caijing Times incited another idea, which is China Netcom is gambling on its future via the dealing.

The story quoted the word from Li Rongrong, Chairman of the State-owned enterprise management commitee, that the number of major state-owned company in each industry will be limited to three to avoid overheated competition. In term of this point, one of the current four telecom operators will disappear later, especially when 3G licenses are distributed. China Netcom is the smallest and youngest one at this time, which makes it agressively "gamble" on its future.

With the share of PCCW, it will be impossible for China Netcom to be sold to other local operators because of the complexity. So it is likyly that China Unicom, who has failed to buy the share from Macau CTM(the major telecom operators in Macau), will be split later before three 3G licenses are released.

A week before the dealing, a source in China Netcom told Amy that his colleagues and him were paying great attention to the possibility China Unicom would be split later, which partyly proved the speculation.

That's why China Netcom chose to deal with cash instead of other ways. It will be much more fast to complete the dealing and imply to the authority its attitude towards 3G. No matter it will still have the money to build the 3G network, the company chose to be alive first.

Gambling is continuing, but just within the executives. The employees in China Netcom are complaining that their salary would be lower after China Netcom bought PCCW. "It is hard to tell the reason, but we all believe in that". said an young employee.

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