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Minister: China to Split Phone Co.

November 26, 2001

BEIJING (AP) _ China plans to break its dominant phone company, China Telecom, into two smaller firms as part of an industry restructuring, a top Chinese telecommunications regulator said Monday.

Regulators hope competition will strengthen Chinese carriers as the country joins the World Trade Organization on Saturday and prepares to open its closed market.

One of the new companies will keep the China Telecom name while the other merges with two smaller carriers created in recent years, said Wu Jichuan, the minister of information industry, China’s telecommunications regulator.

The two new companies will divide along regional north-south lines, Wu said in a brief interview on state television.

China Telecom still dominates fixed-line and Internet services, despite the loss of its monopoly in the 1990s. Its network is one of the world’s biggest and most advanced, with some 100 million lines.

China has said it will allow foreigners to own up to 50 percent of fixed-line phone ventures two years after it joins the WTO, and 49 percent of mobile-phone firms after five years.

Regulators allowed the creation of smaller phone companies in hopes of spurring competition and innovation, but those carriers have taken only a tiny share of the market.

The restructuring will see the end of two smaller companies, data carrier China Netcom Corp. and phone carrier Jitong Communications Co., which are to be absorbed into the new company covering northern China, according to Wu.

``China Telecom will retain the 20 southern provinces, while the 10 northern provinces will be added to China Netcom and Jitong and reorganized to form China Netcom-Jitong Co.,″ he said.

Wu said details of the reorganization were still being worked out.

He said the decision ``didn’t relate to″ mobile phone services and didn’t say whether the new China Netcom would get a mobile license.

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