China Netcom service creeps unannounced into capital

12 Mar 2003

China’s second largest fixed line telecoms operator China Netcom, formed in November 2001 through the splitting up of China Telecom’s assets into regional entities, has rolled out its unlicensed wireless service ‘Xiaolingtong’ to the capital Beijing, putting increasing pressure on the country’s official operators China Mobile and China Unicom. The low key launch of the personal access system (PAS) service in the suburban area of Huairou came in the wake of an official announcement from the outgoing head of the telecoms ministry that, despite complaints from the two sanctioned operators, it would not bar any planned expansion of the system. The PAS service is able to offer cut-price limited mobility telephone access and its use has been employed by both Netcom and China Telecom in many areas, although attempts to launch it in major cities such as Beijing and Shanghai have to date been blocked by regulators. Concerns over the ramifications of the low cost service have driven down share prices for the Hong Kong-listed cellcos even though China Netcom’s service boasts just ten million users compared with the 200 million plus signed up to China Mobile and China Unicom’s networks. Xiaolingtong holds a strong appeal to low-income users as they do not have to pay anything for incoming calls. The two heavyweights – already embroiled in a price war fight for market share – have been forced to offer a discount on such charges where the rival system is available. On the upside, the spread of Xiaolingtong is good news for US-based UTStarcom which has signed USD50 million worth of contracts this week to keep pace with demand for PAS equipment.