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Mark O'Neill

China Netcom Corp, the country's fifth telecommunications carrier, yesterday unveiled its broadband Internet backbone network using the latest optical technology - 8,490 kilometres long and connecting 17 cities.

The network, the country's fastest and most modern, will help China Netcom leapfrog better-funded China Telecommunications and China Unicom in broadband data networks.

The company also confirmed yesterday it planned to take in US$300 million from foreign investors, but the deal had not been closed. The move would be among the first direct investments by foreign investors in a key Chinese telecom firm.

Work on the optic-fibre network, costing 5.3 billion yuan (about HK$4.9 billion), began in August last year and finished on October 28.

Its capacity of 40 gigabytes per second, with 106 switch stations, makes it the fastest such network in China. Its 17 cities include Beijing, Tianjin, Nanjing, Shanghai, Hangzhou, Guangzhou, Wuhan and Shenzhen.

'We will bring to China high bandwidth Internet access and IP-based [Internet protocol] VPN [virtual private network] services,' Netcom chief executive Edward Tian said.

'It will carry comprehensive business and value-added services, including voice, data, video and multimedia.'

The new network was mainly built next to lines belonging to the Ministry of Railways, one of Netcom's four founding investors, together with the China Academy of Sciences, the Bureau of Broadcast, Film and Television, and the Shanghai municipal government.

Construction involved connecting 1,860 km of eight-hole long-distance pipes and two optic fibres within two months, digging 53 km of ditches and installing 60 km of pipes a day.

Netcom chairman Yan Yixun said his company was helping to cut the cost of Internet access.

'The market potential is very large. We hope to make e-commerce an engine of economic growth,' he said.

According to official figures, the number of Internet users in China reached 20 million at the end of last month.

Netcom was set up in August last year with the aim of providing the next generation of telecom infrastructure and all-round broadband network services.

It is the country's fifth telephone carrier, after China Telecom, China Mobile, China Unicom and Jitong Communications, through IP card sales, which have up to now accounted for more than half its revenue.

Mr Tian said that, with the network's completion, the company's priority would shift from construction to development and finding customers for it.

He said Netcom had negotiated US$300 million in foreign investment but declined to name the parties.

According to Hong Kong newspapers, they include Michael Dell, founder of Dell Computer, Goldman Sachs, News Corp, Sun Hung Kai Properties' Kwok brothers and Lee Shau-kee of Henderson Land Development.

Foreigners have invested heavily in China Telecom, China Unicom and other companies by buying stock issued abroad but have not been allowed to make direct investments. Under an agreement signed with the United States last November, China agreed to allow 49 per cent foreign investment in all telecom services on accession to the World Trade Organisation.

Mr Tian and other officials declined to comment on Netcom's listing plans. Analysts expect it to list next year, possibly ahead of Jitong, which said on Wednesday that it would reconsider the timing of its initial public offering, originally due to start at the end of this month, because of volatility in global equity markets.

'I would buy Netcom before Jitong,' one western venture capitalist in Beijing said.

'It is first to market with such an advanced broadband network and is better at marketing. This direct investment is a grey area at the moment but Beijing will allow it in the context of WTO entry.'



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