China's second-largest fixed-line telecom operator China Network Communications Group Corp (China Netcom) is well on its way towards an overseas initial public offering, said company and industry sources.

A top China Netcom official said Thursday in Beijing that he hoped his company would float shares on Hong Kong and New York markets in the first half of this year.

Sources close to China Netcom said that the telecom operator is going to submit its listing plan to the State Council, the nation's cabinet, for approval at the end of this month or early next month.

"However, judging from work procedures, the listing time is not likely to happen before late September or early October," said the source close to China Netcom who declined to be named.

Analysts believe that given the saturation of the fixed-line telephone business, China Netcom's broadband-related business could be the best chip for China Netcom to lobby investors with.

China Netcom yesterday formed a 500 million-yuan (US$60 million) joint venture with US International Data Group (IDG)'s venture capital fund and another company to march into broadband Internet business in China. The Chinese company is the biggest, but not majority, stakeholder of the new company named China Online and IDG Technology Venture Investments will take less than 30 percent of the stake. The company declined to name the third investor.

As a part of China Netcom's broadband network strategy, China Online will operate 116.com.cn, a broadband network.

It will also act as the only nationwide operator of China Netcom's short messaging service (SMS) for the personal handy-phone system.

China Online also provides voice value-added services like telephone chatting, video conferencing and voice messages.

"Broadband will be the focus for China Netcom in the years to come and the establishment of China Online is in line with that strategy," said Leng Rongquan, vice-president of China Netcom and chairman of China Online.

He said China Netcom will not bundle its broadband subscribers with the broadband portal, but is likely to give some preferential service charges to the latter.

He hoped China Online will break even in its SMS and value-added voice services in one or two years.

Leng said his company has been testing the interoperatability of SMS with China Telecom, China Mobile and China Unicom.

(China Daily February 18, 2004)