China Telecommunications Corporation (China Telecom), the country's largest fixed-line operator, has set up an office in London, another big move in its overseas expansion.

"The office is now in operation," said an official with China Telecom who declined to be named.

"We are preparing to establish a company in Europe after that to explore business opportunities there," he said.

Wholly-owned by China Telecom, the new office is aiming at businesses related to Chinese companies' overseas operations, overseas companies with participation from Chinese investment and telecoms businesses in regions where overseas Chinese live.

"It is a good step for China Telecom into the European market to explore overseas businesses," said Dai Chunrong, an analyst with China Securities.

She said she believed that with years of development, China Telecom is able to provide competitive telecoms services and be in a better position when competing with overseas rivals.

As an example, China Telecom's listing arm in Hong Kong - China Telecom Ltd - reported early this month a 28 percent growth in first-half earnings, buoyed by soaring broadband business and the acquisition of 10 provincial networks from its parent company earlier this year.

During the six months through June, the company posted net profits (excluding connection fees) of 10.47 billion yuan (US$1.26 billion), while revenue grew 9.8 percent to 76 billion yuan (US$9.18 billion). Including connection fees, the company's net income rose 13 percent to 14.7 billion yuan (US$1.78 billion).

The country's rapidly growing Internet sector has boosted China Telecom's business. Its broadband users surged 50.6 percent to 10.9 million (accounting for 61.5 percent of the country's total in the first half of the year).

The revenue of its Internet business, a key profit driver, soared 51.6 percent as a result, contributing 8.7 percent of the company's total turnover, up from 6.3 percent a year earlier.

"Via overseas listing, China Telecom is also gaining increasing international influence with the participation of foreign investors," Dai said.

However, Dai said she believed the company's overseas expansion at the moment was still at a very early stage and the best modes for overseas expansion such as buying shares of foreign carriers or establishing joint ventures should be carefully studied.

In fact, China Telecom triggered its expansion to the international market in early 2002 when the company established a branch company in America.

In 2002, it was awarded a license by the United States telecom authorities to provide international telephone and Internet data services between the two countries.

China Telecom thus became the first domestic company to obtain an operating license in an overseas market.

The license enables China Telecom to provide international telephone calls, Internet data communications and television transmission between China and the United States.

Analysts believe that the license has significantly reduced China Telecom's operating costs in international business and has consolidated its foothold in overseas markets.

"As a matter of fact, overseas expansion will become a developing trend for domestic telecom operators becoming really globalized," Dai said.

"Meanwhile, international experience will also help domestic carriers to learn from overseas telecom operators and therefore boost their development," she said.

Analysts say that telecom operators' international strategies partly echo the Ministry of Information Industry's target of developing China's telecom industry into a powerhouse in the international market.

Almost all the major telecom operators including China Mobile, China Unicom and China Netcom, are trying hard to achieve an international presence.

(China Daily September 15, 2004)