The China Network Communications Group Corporation, (China Netcom Group), the country's second largest fixed-line operator, is to dissolve its subsidiary China Netcom International Communications Co Ltd, a unit that deals with China Netcom's international-related business.

Under the restructuring arrangement, China Netcom International communications Co Ltd will be merged into China Netcom Group.

A new international branch will be created to manage Netcom's overseas business, a spokeswoman with China Netcom said in a telephone interview with China Daily.

"We will announce a detailed plan (regarding the restructuring) soon," she said.

The spokeswoman would not say how Netcom's international branch and Hong Kong's operator PCCW Ltd would divide the work in developing overseas business operations.

Netcom purchased a 20 per cent stake in PCCW Ltd for US$1 billion in January.

The alliance was initially designed to jointly develop business opportunities on the Chinese mainland, but later the two companies started looking into how to take advantage of the tie-up to tap into overseas markets.

China Netcom Group established Netcom International in 2003, which has integrated all the international networks assets within the Group, and was designed to exclusively deal with international-related services.

Such a move had been a good "selling point" for Netcom before its listing in Hong Kong last November, said Chen Jinqiao, a senior research fellow with the China Academy of Telecommunications Research under the Ministry of Information Industry (MII).

However, after the listing, "It's better and more natural for Netcom to integrate the international business unit into the group company," Chen said.

In a statement, Netcom said its corporate structure remains flawed though the firm has made substantial progress exploring overseas markets.

Netcom International recorded approximately 2 billion yuan (US$246 million) in annual revenues last year.

Netcom has been the boldest of the top four Chinese telecoms carriers in cracking overseas markets.

Netcom International officials said last year that in the near future the unit aims to become the preferred partner for global operators in China and Asia, in terms of both voice and data businesses.

Besides the tie-up with PCCW, Netcom acquired 100 per cent of Asia Netcom and teamed up with Spanish operator Telefonica.

The restructuring of CNC International is aimed at integrating its resources and streamlining business processes in a bid to shore up Netcom's global competitiveness, Netcom Group said in the statement.

Eight working groups, established by Netcom Group, are working on the restructuring scheme.

Netcom said the restructuring would neither discontinue nor affect services to its customers while employees of Netcom International are being " repositioned."

The restructuring has sparked speculation that Netcom will lay off some of the Netcom International workforce.

Chen said the consolidation of the overseas-related business could benefit Netcom by giving a big boost to the firm's "going-global" strategy.

"Compared to other domestic operators, Netcom has made much more comprehensive preparations for globalization," the researcher said.

Despite being the smallest of the top four domestic telecoms carriers, Netcom has billed itself as the operator with the greatest technical strength, largest pool of partners and widest service area in China.

(China Daily July 27, 2005)