China Telecom and China Netcom will limit competition by staying in their respective regions
China's two major fixed-line telephone operators have signed an agreement to confine each other to their major geographical market to limit competition, according to the Beijing Times.
China Telecom, which operates in central and southern China, and China Netcom which is based in the northern region, were split off from the former nationwide monopoly China Telecom to spur competition in the sector.
"Competition brings no profits at all nowadays, as there is little room for growth in the almost saturated fixed-line market. The agreement aims to restrain negative competition and wasted investment," an unnamed China Telecom source said.
Another source quoted an expert from the Ministry of Information Industry as saying that the agreement is good for the operators, who may be able to avoid duplicate investments.
In January, China Netcom sold its assets in Guangdong and Shanghai municipality to its parent company for 3.5 billion yuan ($437.5 million), a sign that China Netcom was withdrawing from the southern market.
The agreement will help the two fixed-line operators counter cellular operators, as some customers, encouraged by caller-pay schemes introduced by China Mobile, switch entirely to cellular.
Under the new China Mobile charging scheme, subscribers who buy monthly prepaid fee packages no longer pay for receiving calls, just like fixed line users.
© 2007 Xinhua News Agency
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