China Netcom Group Corp (Hong Kong) Ltd, the smaller of two mainland fixed-line telephone firms, confirmed yesterday that it was in talks to sell stakes of its wholly owned subsidiary Asia Netcom.

 

"Selling (Asia Netcom) is one of the options that we have to lower the company's operating cost," said Zhang Chunjiang, chairman of China Netcom, yesterday.

 

"We are currently under discussion with a few companies that have interest in buying Asia Netcom," Zhang said, without giving any further details.

 

Before Zhang's confirmation of his company's plan to sell Asia Netcom, there was a lot of buzz in the local market that General Enterprise Management Services (GEMS), a group led by Simon Murray, former head of Hong Kong ports-to-telecoms conglomerate Hutchison Whampoa, was the most likely buyer to reach the deal with China Netcom.

 

If the deal is finalized between the two companies, GEMS will pay China Netcom HK$2.73 billion (US$350 million) to buy Asia Netcom.

 

Asia Netcom, which operates undersea phone cables, is primarily the firm formerly known as Asia Global Crossing, that China Netcom bought out of insolvency for US$120 million plus the assumption of unspecified liabilities in 2003.

 

Zhang told reporters yesterday that China Netcom is in talks with China Central Television (CCTV) about cooperation on the Internet Protocol Television (IPTV) market.

 

"Our discussion about the possible cooperation with IPTV licence holders such as CCTV is under way," Zhang said. "We will see how appropriate we are for each other before we finally reach a partnership."

 

IPTV is a system where a digital television service is delivered to subscribers using an Internet protocol over a broadband connection.

 

The State Administration of Radio Film and Television issued the second IPTV licence to CCTV this month to further strengthen IPTV's recognition and influence in the local market. Last May it issued the first IPTV licence to Shanghai Media Group.

 

Zhang also said that China Netcom would not cut rates for Little Smart, or the personal hand phone system in Beijing, despite rival China Mobile's recent reduction of mobile charges in the city. Analysts said it would pressure carriers such as China Netcom.

 

"We have not seen any impact on the company from the price reduction (by China Mobile) and so far we have no plan to cut our rates for Little Smart," said Zhang.

 

China Netcom's fixed-line telephone subscribers continued to grow to 118 million in the first quarter, an increase of 2.711 million quarter-on-quarter. Its broadband subscribers also reached 12.56 million, 9.5 percent up on a quarterly basis.

 

China Netcom's Hong Kong shares fell by 2.75 percent to close at HK$14.1 (US$1.8) yesterday.

 

(China Daily May 17, 2006)