China Telecom to trial mixed ownership

China Telecom, one of the country's three State-owned telecom operators, said Tuesday that it plans to pick two or three subsidiaries to trial a mixed-ownership structure in 2014, echoing the central government's calls to introduce private investment into State-dominated sectors.

The company will open up four sectors to private investment, which are Internet applications, information and communication technology as well as innovative businesses, Wang Xiaochu, chairman of China Telecom, said at a company conference in Beijing.

Best Tone, a subsidiary of China Telecom that focuses on information services, will be included in the trial, Li Anmin, general manager of China Telecom's innovative business department, told the conference.

The three State-owned enterprises (SOEs) have long been blamed for monopoly in the telecom sector. China Telecom's latest move puts it a step ahead of its bigger rivals China Mobile and China Unicom.

Central SOEs are at the center of China's mixed-ownership reform, Huang Shuhe, vice chairman of the State-owned Assets Supervision and Administration Commission, which oversees 113 central SOEs, told the same conference.

He suggested China Telecom speed up the reform and provide a good example for other central SOEs.

"China Telecom has already opened up some sectors [among the four it just announced] to private investment," Tan Yanming, senior consultant with German firm Detecon Consulting, told the Global Times Tuesday.

He citied the example of social messaging app Yixin, which was launched in August 2013 in partnership with Internet firm Netease Inc.

"Introducing private capital could invigorate innovation potential for the State-owned firm, which would increase its competitiveness in the mobile Internet era," Tan said.

He expected China Telecom would consider opening up its core business such as the sales division and network construction in the next phase, but this should be made under the condition of a clear definition of property rights.

After the reform decision released in November 2013 by the Third Plenary Session of the 18th Communist Party of China Central Committee, which said China will encourage non-public-owned capital to participate in SOE reform, an increasing number of big SOEs have rolled out measures to develop mixed ownership.

PetroChina, the country's largest crude oil and gas producer by output, announced on Monday that it plans to sell off equity from a new pipeline project in order to raise cash, reduce spending and introduce private investment into the energy sector.

"The equity transfer will help the company optimize the resource allocation and financing structure and diversify the ownership structure of the company," it said in a filing with the Hong Kong stock exchange.

The move is good news to private energy firms, as currently 85 percent of natural gas pipelines in China are controlled by PetroChina, Wang Xiaokun, an industry analyst with Shandong-based consultancy Sublime China Information, told the Global Times on Tuesday.

"If private firms explore shale gas, they will often use PetroChina's pipelines and sometimes have to accept some imparity clause set by the State giant," she said, noting that this situation will gradually change if a third party can operate the pipelines.

PetroChina's move followed that of Sinopec, another State-owned oil giant, which announced on February 19 that it would introduce private capital to its sales unit, which was also seen as a move to experiment with a mixed-ownership structure.