ChinaTelephone.jpgBT,
the UK's dominant telco, turns bullish on China. Back from a recent
trip to the PRC, BT's chief executive Ben Verwaayen told reporters that
BT's annual revenues from China would reach $250m within three years.

Currently,
BT's revenues from its Chinese operations are only “tens of milions” of
dollars so to meet that target BT will have to expands its operations
dramatically — Verwaayen talks of doubling BT's staff and investment
in the PRC. Perhaps even an acquisition is on the cards.

Why is
BT so keen on China? To state the obvious, China has a lot of telephone
users and their number is growing fast — unlike in the west.

But,
its difficult to see exactly what BT — or any other western carrier —
can realistically achieve in China's regulated market today.

On
the plus side, BT has experience operating in one of the world's most
competitive telecoms markets. It has had great success fending off
competition from upstart carriers and encouraging its fixed-line
customers to embrace broadband services.

But I'm not sure that
that experience counts for much in China where the market dynamics are
quite different and the regulatory environment challenging.

Like
other western telcos, BT has a Chinese JV, with China Netcom, but it
does not really have much to show for its ten-year presence on the
mainland. Indeed, at an analyst presentation (pdf) last year, Andy Green, CEO of BT Global Services, struggled to remember the name of BT's “long-term partner” in China.

As Xinhua notes, China's telecom market has long been a tough nut for overseas operators to crack. AT&T, launched Unisiti, a JV with Shanghai Telecom, back in 2000.

Unisiti offers services such as virtual private networks to multinationals but it has not apparently had much success — its press release list
records visits and meetings rather than customer wins. Company
executives have blamed Unisiti's poor performance on regulatory
limitations.

Foreign operators are currently not permitted to
provide telecoms services in the PRC. So instead they set up JVs with
and take small stakes in China's incumbent carriers. For example,
Vodafone and Telefonica have stakes in Hong Kong-listed China Mobile
and China Netcom respectively.

China Telecom is the only
operator which has yet to partner with a foreign player, although the
firm says it has been talking to five potential candidates. Verwaayen
would not confirm whether BT is one of the possible investors.

For
me, these tie-ups bring back memories of the global alliances fad in
the mid 1990s, when “strategic partnerships” between western carriers
were announced almost daily. But these ventures quickly spluttered to a
failure as huge conflicts of interest became apparent.

So, while
buying a minority stake in a Chinese carrier makes good political sense
today and serves as a place marker for future ambitions, I suspect that
China will only become a meaningful opportunity for western carriers
when they are allowed to compete against — rather than partner with —
the incumbents. Verwaayen seems to think that will happen in the next
three years. He could well be right.

Technorati : , , , , ,

email