CHINA INFORMATION TECHNOLOGY LAW NEWSLETTER
Vol. 3, No. 4- March 29, 2002
TOPICS THIS ISSUE:
- First telecom provider joint venture
- The Regulations on Foreign Invested Telecommunications Enterprises
- Recent Telecom Regulations and Circulars
- Oracle Development Center in China
- Ericsson increases cooperation with China Telecom
First telecom provider joint venture
The liberation of the telecom industry in China has borne results. As a consequence of China's WTO commitments and the new Regulations on Foreign Invested Telecommunications Enterprises (FITE Regulations) that were issued this January, the first joint venture in this industry was launched last week between A T & T, Shanghai Telecom, a subsidiary of China Telecom, and Shanghai Information Investment Inc. (SII). The venture that goes by the name of Shanghai Symphony Telecommunication Co. is structured so that Shanghai telecom holds 60%, AT & T 25% and SII 15%. In this industry, China has agreed to open up to foreign investors, limited to 49% stakes in ventures, in 17 cities by the end of 2002. At the moment, Shanghai Symphony can only operate in the Pudong business area in Shanghai but hopes to launch similar operations in other cities such as Beijing and Guangzhou. This venture is a great step forward since until now only a very limited number of approvals have been granted, and then only by special orders from senior levels of government.
Shanghai Symphony's brand name is Unisiti and it will offer IP broadband service and managed hosting. With Unisiti, A T & T hopes to provide companies in the Pudong area with as high quality communications services as are available anywhere else in the world.
(Sources: Agence France Presse, World Markets Analyses)
The Regulations on Foreign Invested Telecommunications Enterprises (FITE)
Those of you who received our newsletter in January will have noticed that in volume 3, numbers 1 and 2, we published the new Foreign Invested Telecommunications Enterprises regulations in their entirety. The following will outline the most relevant parts of their contents.
The regulations came into effect on January 1, 2002 and are the first formal legislation permitting direct foreign investment in the telecom provider industry. The target companies are those established as sino-foreign equity joint ventures. The regulations implement China's WTO commitments and provide the procedures for establishing an FITE in the industry. It should be noted that a foreign invested enterprise in this area will not only be subject to the FITE Regulations but also the Equity Joint Venture Law and Telecom Regulations. The rules divide telecom services into BTS (basic telecom services) and VATS (value-added telecom services). BTS includes provision of public network infrastructure and public data transmission. VATS includes telecommunications and information services provided through the public network infrastructure (i.e. ISP and more). The rules set out the qualifications of the foreign and Chinese partners and the procedure to establish a FITE. The regulations also specify the minimum registered capital levels according to the coverage of the service area. Capital contributions by the foreign investor may not be more than 50%. There are also requirements on the main foreign and Chinese investor, i.e., who contribute more than 30% of the total capital contribution, that are more extensive when the FITE engages in BTS than in VATS projects.
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Recent Telecom Regulations and Circulars
Other regulations that have been issued in the telecom industry in the last six months, are the following:
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Circular on the Administration of Telecommunications Construction. The Circular provides principles on how to construct public telecom networks in the areas of public and special telecom networks and broadcasting television.
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Circular on the Administration of Telecommunication Business Licenses, which regulates procedures for application and approval of such licenses, and includes BTS and VATS licenses.
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Circular on the Administration of Telecommunication Equipment, which among other things requires access permits for (a) telecommunication terminal equipment, (b) radio telecommunication equipment, and (c) network inter-connection equipment.
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Ministry of Information Industry regulations concerning licensed carriers in joint ventures. Basically, the regulations stipulate that if a licensed telecoms carrier has fewer than 51% of the shares, the joint venture should apply to the ministry for a license before engaging in the telecom business. With these regulations it seems that a main target may be SARFT (State Administration of Radio, Film and Television) and China Netcom, who have formed some joint ventures with less than 51% share ownership.
(Source: China Daily)
Oracle Development Center in China
Oracle, the world's largest software company has had a presence in the Chinese market for more than a decade. To increase it, Oracle has launched its first Development Center in China. It is also the only enterprise software center in Asia. The center is located in Shenzhen High-Tech Industry Park and should start its operations in May. It will be dedicated to creating software solutions and services for local enterprises. The following areas will be emphasized at the center: 1. Project development, which aims at implementation of large national projects. 2. Laboratories. 3. Product knowledge and connected customer center, focusing on knowledge transfer and improvement of customer services. 4. Development services, focused on testing and language translation of Oracle products. A team will be created that will focus on the needs of the telecom network infrastructure in China.
(Source: PR Newswire)
Ericsson increases cooperation with China Telecom
Ericsson has signed a contract with China Telecom to provide ENGINE, a carrier-class network. The deal enables China Telecom to migrate to a multi-service network solution that will enhance China Telecom's international competitiveness. ENGINE is a global multi-service network for network operators and is able to carry large volumes of IP-based traffic. It enables China Telecom to migrate from circuit-switched networks to switching technologies based on ATM and IP packets. Ericsson will also provide consulting and implementation services.
(Source: Business Wire)
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