China's Telecom Facing Three Major Challenges

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Last updated at: (Beijing Time) Sunday, December 01, 2002

China's Telecom Facing Three Major Challenges

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World telecom operators are as reported making a radical reduction of their staff and still have to grapple with many problems and difficulties as those forced on a numerous number of commercial undertakings in China and abroad.

Needless to say China's telecom is in no less an easy position of difficulties as challenging all the others outlandish under a world sluggish telecom economy. Though a speedy growth has been got, things standing on the way of the country's telecom will not be all that easy as with various world telecom businesses in a straitened situation.

Price pressure accompanying heavy input

Underlying an exacting 50 percent telecom pricing is capital depreciation and this may last over a period of 5 to 25 years. Being a capital-intensive service sector, Telecom industry compels a huge amount of investment for infrastructure construction, which has to be covered by service earnings expected. Meanwhile, some amounts of profits will have to be yielded to get the operations going.

Service must be at a high-pricing level under pressure and this may not be simply or effectively curbed though exorbitant profits are excluded. This is because other component parts deciding service price as wage and sundries of fees as on mission, travel and rental are not easy to be cut. This is to say there leaves not much room for making a cut. Generally speaking, adjustments are needed and when necessary can only be made in a forced manner affecting normal operations of enterprises and production.

High price in an environment of heated competition inevitably brings great pressure on market consumption. A product at an excessive high price will give no competitive force. When an orderly fair mature market is developed, any acts for a reduction of price despite losses but purely for a greater share of market must be regarded as unjust competition in violation of laws ruling on competition.

Telecom operators may apply themselves to efforts merely for increased gains instead of more profit from their conduct of trade. In an environment of market economy, profit indexes are far more important than market return. Problems would arise from pursuits of profit gains from a usurious market for getting back investment and this would boomerang on the operators' edge and percentage of market share affecting their development, as a problem to be studied.

Lack of personnel analyzing investment

Scientific and rational analysis of projects under construction is the precondition furthering investment and guaranteeing a rational amount of economic returns. As demanded, a large number of personnel resources known at a high-quality level are needed without doubt and this must be especially so by the telecom sector.

The causes are many for a dearth supply of personnel specializing in research on investment. First, no cost had been taken into account of telecom construction let alone a quantitative analysis of projects under a planned economy as in the past. Thus leaving little room for the rise of such personnel. Second is a lack of specialties for training personnel to that end by institutions of higher learning.

It must take a long period of time to train personnel to be employed to that end. As is demanded by a modern telecom sector, knowledge must branch off into many a varied categories of expertise as telecom technology and economics as accounting and market operation. It needs a much longer time and more input to foster personnel of cross-specialty professionals.

Perfect economic modes in crying need

Summarily speaking, two specific modes must be built in line with the theory governing telecom operators' operation, investment and management: One is a distribution mode governing income in the structure of telecom industry; the other is a cost mode specifying the cost of telecom service.

The two said modes must be in the way backing up a wide range of operations of the telecom sector. But no mature modes have been worked out as things are with those seen abroad. Meanwhile, there would be no way out borrowing on foreign modes and theories from abroad as every country has its own specific conditions.

With modes rest operational market tactics, pricing tactics and investment tactics helping policy-makers to know clearly how much earnings, profit gains and losses would be brought to operators. The investors would likewise be helped to decide on the most economic and profitable ways to meet market demands with less investment made under existing net resources conditions found.

Setting up an operation system in whatever a country can be spread among other telecom operators. But so far we haven't an operator credited with success to that end. So we haven't yet been at a time to make investment from a merely pre-emptive pat on the head.

By People's Daily Online

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