China Telecom, however, is unlikely to take on a foreign strategic partner just for the money. China Telecom earned US$3.3 billion in profits last year on US$25.8 billion in revenues and should not have any problem tapping the capital markets for funding.
"The primary goal is not only for additional capital, but also for the synergy in enhancing our operations and management," Lisa Lai, manager of China Telecom's investor relations department, wrote in an e-mail. "We have been approached by a number of parties. However, at present the company has not commenced any substantive discussion on this issue."
When the other Chinese telecom operators sold minority stakes to foreign strategic investors in the past, not surprisingly, they were aiming to get something in return. China Mobile wanted to learn how mobile-phone standards were set globally, so it partnered with Vodafone and sat by its side on international standard committees to learn the rules of the game. China Unicom teamed up with SK Telecom to build muscle in negotiating to reduce the royalties both had to pay to CDMA patent-holder Qualcomm.
"The move to allow foreign investment is not driven by funding but more for technological know-how," says Hwai Lin Khor, a research analyst with ABI Research Singapore.
Even though financing needs may not be the driving force behind the opening of the telecom sector, many observers are predicting that China will eventually open up to greater foreign investment, particularly as Beijing begins to issue 3G licenses to each of its three new telecom giants.
In search of "other people's money"
This could provide foreign telecom operators, particularly those that have already rolled out 3G cell-phone services in their home markets, with the opportunity they have been waiting for. Foreign telecom operators have the technology and experience their Chinese counterparts lack. "We should attract more foreign investment when we roll out 3G and use other people's money to build the networks," says Beijing University of Posts & Telecommunications professor Lu Tingjie.
BusinessWeek's Moon Ihlwan, Jennifer Schenker, and Kerry Capell contributed to this report.
