NAOC: Telco's Making Redundant Investments

<- August 28, 2008 ->

China Business News, 8/28/08

On August 27, Li Jiayi, auditor general of the National Audit Office of China (NAOC), presented a financial report to the National People's Congress Standing Committee reviewing the Chinese budget and its income and expenditures in 2007. This showed that from 2002-2006, China Mobile Communications Corporation (CMCC), China Telecommunications Corporation, China United Telecommunications Corporation, China Netcom Group and China Tietong invested RMB 1.12 trln in the construction of basic telecommunications infrastructure. Due to a lack of overall planning and redundant investment, China's network utilization rate is relatively low, with approximately only 1/3 of fiber optic network capacity being used.

As one example, he mentioned that China Telecom (NYSE: CHA; 0728.HK) and China Netcom (NYSE: CN; 0906.HK) invested a combined RMB 50.8 bln in the construction of redundant fixed-line telephone networks. Liu also mentioned the case of China Tietong investing RMB 45.5 bln on the construction of a competing national fixed-line telephone network.

Under Liu Jiayi's suggestion, the State Council has ordered the related departments to undertake further research to improve the situation.

Keywords: Li Jiayi, network construction, regulation, policy, capex, 0728.HK, 0906.HK, CHA, China Mobile, China Mobile Communications Corporation, China Netcom, China Telecom, China Tietong, China United Telecommunications Corporation, CN, fixed-line, investment, National Audit Office, State Council, telecom, fiber optics, wireless

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