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| Gartner Dataquest Says Foreign Telecom Companies Face Big Challenges in China Despite China's Admission to the World Trade Organization |
| Report Examines the Key Market Opportunities for Telecom and Networking Companies in China |
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STAMFORD, Conn., November 12, 2001 - China joined the World Trade Organization (WTO) on November 10, 2001, which in theory will open the door for foreign telecommunications vendors to compete in this market, but these companies face difficult challenges, according to Dataquest, Inc., a unit of Gartner, Inc. (NYSE: IT and ITB).
Under the WTO agreement, foreign companies cannot offer telecommunications services independently in China. These foreign companies will need a local partner, and majority control will remain with Chinese companies. "The draft WTO agreement that has been made public only provides a basic framework of the agreement, with no details on how it will be implemented," said Ron Cowles, principal analyst for Gartner Dataquest's worldwide Telecommunications and Networking group. "Some of these ambiguities will be clarified when the agreement is signed, but chances are that many questions will remain unanswered. These issues will have to be resolved over time. But with China's history of making ad hoc and arbitrary decisions, it can potentially lead to a string of disputes with trading partners." The explosive growth of China's networks will create immense opportunities for equipment vendors over the next five years. China's equipment market, with the exception of the telephone-switching sector, is open to foreign vendors. In addition, tariffs on high-tech imports will be eliminated by 2005, making it easier for foreign companies to compete with domestic manufacturers. China's domestic telephone switch manufacturers should continue to sell aggressively into the central office (CO) switching markets in which their strengths are clear. At the same time, they should continue to develop partnerships with foreign vendors that are willing to transfer technology and help them enter high-end niche markets such as optical transmission and high-speed wireless. "Foreign players can expect strong competition from the Chinese operators when the facilities-based services market is open," said To Chee Eng, principal analyst for Gartner Dataquest's Asia/Pacific Telecommunications and Networking group. "Competing with them on infrastructure will be an uphill struggle - at least in the short term. A more viable proposition is to partner with them, either as investors or resellers, and provide market differentiation through value-added services and better customer service and support." For foreign investors, the immediate opportunity is in mobile. Internet access, which was liberalized only recently, will provide an immediate opportunity to build up market share in the access services ahead of actual opening of the fixed line market. "Foreign carriers need a local partner to offer fixed-line services in China," Cowles said. "But finding an appropriate partner will not be easy. Existing operators are set up to be national players and they may not be suitable partners because the regulations permit investments in operators that operate in specific cities only. Foreign investors may be forced to look to new operators that may lack both funding and experience. Competing with existing carriers, especially against their extensive network infrastructure, will be tough." Additional information is available in the Gartner Dataquest Perspective "China After WTO: The First Uncertain Steps." This Market Analysis document looks at what the key market opportunities in the telecommunications and networking space will be after China joins the WTO. This research is published by Gartner Dataquest's Telecommunications and Networking group. This group provides analysis for the full spectrum of telecom and networking issues. To keep up to date on the latest telecommunications issues, please visit Gartner's Telecommunications Focus Area at www.gartner.com/1_researchanalysis/focus/telecom_fa.html. To subscribe to Gartner Dataquest programs, please call 408-468-8000. Reports can be purchase on the Internet at www.gartner.com. Gartner Dataquest is the recognized leader in providing the high-technology and financial communities with market intelligence for the semiconductor, computer systems and peripherals, communications, document management, software and services sectors of the global information technology industry. Gartner, Inc. is a research and advisory firm that helps more than 11,000 clients understand technology and drive business growth. Gartner's divisions consist of Gartner Research, Gartner Consulting, Gartner Measurement and Gartner Events. Founded in 1979, Gartner, Inc. is headquartered in Stamford, Connecticut, and consists of 4,300 associates, including 1,200 research analysts and consultants in more than 90 locations worldwide. The company achieved fiscal 2001 revenue of $952 million. For more information, visit www.gartner.com. |
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Contact: Tom McCall 408-468-8312 tom.mccall@gartner.com |
