"China Telecom is facing another restructuring,'' said an official with the MII who preferred to be unnamed.

Not yet determined is which of several break-up proposals the MII and the State Council will enact, the source said.

China Telecom is the country's biggest telecom operator and generates more than half the income of telecom industry. It owns about 80 percent of the country's telecom network capacity and controlling shares in the fixed-line telecom business, data transmission and Internet access services.

China Telecom remains a fixed-line monopoly. When the company recently changed its pricing structure for local fixed-line phone calls, the public complained.

China Telecom presently is preparing for an overseas initial public offering. But efforts in this regard have slowed, another hint that a major split could be coming to the company.

One possible plan, based on the AT&T break-up in the US in the early 1980s, would see China Telecom split in three. The new entities would each focus on a specific aspect, be it local fixed-line telecom, long distance calls or data transmission businesses, said Yang Peifang, vice-president of China Information Economic Commission and an MII senior researcher.

"Professional operation is the key to success,'' Yang said. "Comprehensive companies will not survive this highly specialized age.''

Another proposal would separate China Telecom into competing north and south branches.

Some believe a split would harm the industry. Those critics include Han Deqiang, researcher with the Beijing Aeronautic and Astronomic University.

China's expected entry into the World Trade Organization will bring international telecom giants into the market. Splitting China Telecom up will only make the domestic industry more vulnerable, Han said.

Han said China Telecom should reform, especially in the area of explaining its finances to the public, though.

"A public hearing should be held before the government decides to adopt any reform plan,'' Han said. "Telecom experts, economists and common customers should all have their says.''

A third possible split scenario could see the government step in to separate the telecom network from the telecom business, said Han Xiaoming, an economist at the Renmin University of China.

This would be similar to reforms in the broadcasting sector, he said. In this prospect, one telecom network firm will be formed to manage the country's network resources. Any licensed telecom operators could lease network capacity from the network company.

Since no operators would own the network, competition would be fair, he said.

This idea has never been tried in this industry and could create technological problems, Yang Peifang said.

Most experts agree that, regardless of the split decision made, the government should set up a compensation fund to offset losses to operators who provide such universally necessary services.

"This is unfair to China Telecom, so a compensation fund should be formed to pay for the losses made in such services," Yang said.

(chinadaily.com.cn 05/22/2001)