Friday, January 21, 2005

the dealing between PCCW and China Netcom

I knew from the beginning that China Netcom would buy PCCW at last. The Chairman of China Netcom, Dr. Edward Tian, is a person with great desire to push the company to be the world-class company. You can see it from his operation to buy Asia Global Crossing in 2002. The media and analysts said the operations were like the small snake swallowed the big elephant. But no one can see the advantage of the buying till now.

The special Sina column for the dealing said there are six advantages for China Netcom to buy PCCW:
(1) China Netcom can exchange the market with the advanced managing policy of PCCW.

It is virtual concept in fact. You can not learn the experience only with some executives in the management board. If the company wants to learn, it should be better that they send someone to MBA school.

(2) Enlarging the marketing area such as Pearl River Delta. China netcom can enter into Hong Kong market and PCCW can enter into mainland.

China Netcom is hard to enter into HK market because it is already quite competitive. It is hard to survive in a area where you are not familiar.

(3) China Netcom will be the leading Asia telecom operator with Asia Global Crossing and PCCW.

It is virtual, too. PCCW is not part of China Netcom first. Both AGC and PCCW can not guarantee China Netcom's future development.

(4) The one-stop operation between Hong Kong and mainland.

I don't know much about it, so no comment.

(5) PCCW's abundant money and capability of earning profit will make up the investment story of China Netcom.

That's totally kidding. Look at the PCCW stock in Hong Kong market. It has already fell down about 13 per cent last year. Investors didn't highly expect the company, which partly told that PCCW's embarassed situation in Hong Kong now. How China netcom's investment story be made up via buying the shares from the investers-disgard company?

(6) PCCW's management team and advanced technology can be introduced into mainland.

The advantages can also be achieved in the other ways, such as signing contract, training.

A veteran professor in Beijing University of Telecommunication didn't want to comment on the event. An analyst said that China Netcom should use the 10 million US dollars to invest in the mainland market instead of Hong Kong market. But they are just the few who told they didn't like the dealing.

When Lenovo bought the PC department in IBM, analysts said that it is the tuition for the company to learn how to operate in a global way; When China Aviation Operations(Singapore) lost great money in speculating the oil price, analysts said that it is the price for the Chinese company to learn how to play with international companies; Now, we can say that it is the chance for China Netcom to learn from PCCW, though it has already paid 10 billion US dollars.

3 comments:

Stepintowater said...

Just some thought come up in my perspective:

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(1) China Netcom can exchange the market with the advanced managing policy of PCCW.

You can not learn the experience only with some executives in the management board. If the company wants to learn, it should be better that they send someone to MBA school.
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I don't think sending someone to MBA school will benifit the company more than learning experience from other company. Both managment policy and those taught in MBA school are sort of knowledge base and previous experience. When they apply to the special market like China, the difference between them can be hardly told. On the contary, if PCCW really consider China as a big potential market, helping / being helped by NetCom is obvious benificial. Considering part of Netcom is previous china telcom, which have tremendous experience in China market.

Stepintowater said...
This comment has been removed by a blog administrator.
Stepintowater said...

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(2) Enlarging the marketing area such as Pearl River Delta. China netcom can enter into Hong Kong market and PCCW can enter into mainland.

China Netcom is hard to enter into HK market because it is already quite competitive. It is hard to survive in a area where you are not familiar.
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Talking abuot the market of telco, one should notice that telecommunication business is not ordinary. Enlarging the marketing in PRD is of special interests. Telco needs two-way communications, for this case, Hong Kong to Guangdong or vice versa. Nowadays, there's cooperations between many HK operators and mainland partners, no doubt overhead is large in such business. If Netcom and PCCW are smart and strong enough, they can use their advantage to enlarge their own share to the market. One should notice that there are so many offices and factories in Guangzhou, Dongguan, Shenzhen, are doing close business with Hong Kong and Taiwan conterparts. These market can be much more profitable then Hong Kong telco market alone.