Keynote Speech from Mr. Xunsheng Zuo, CEO of China Netcom


Keynote Speech from Mr. Xunsheng Zuo, CEO of China Netcom

Honorable Secretary-General Yoshio Utsumi, Director Zhao Houlin,

Distinguish Guests,

Ladies and gentlemen, Dear friends,

Good morning. It is a great honor for China Network Communications

Corporation (“CNC” for short), as one of the major telecom operators in China, to be invited to the 50th Anniversary of ITU-T. Please allow me, on behalf of

CNC as well as China’s telecom operators, to extend my warmest congratulations.

CNC was founded on the basis of the affiliated companies of China Telecom in the northern 10 provinces, China Netcom Shareholding Company and

Jitong Communications Company Limited on May 16, 2002. CNC operates all range of services based on fixed telecom networks. CNC Group has RMB 60 billion registered capitals, RMB 300 billion assets and a workforce of 299,000.

China Netcom Group (Hong Kong) Limited was successfully listed in Hong

Kong and New York stock exchanges as a red-chip company in November

2005. In 2005, CNC’s revenue reached RMB 91.5 billion and our profits amounted to RMB 6.8 billion. The price of CNC’s stock increased from HK$

8.48/share during the IPO to HK$ 14/share today. The capitalization reached around HK$ 90 billion. In early 2006, CNC was selected as Hang Seng Index constituent stock one year ahead of schedule. CNC won the recognition of the IOC with an overwhelming advantage and became the official partner of

Beijing Olympic Games in the field of fixed communication services in July

2004 to independently undertake communication guarantee task.

CNC has large scale networks that cover all over China and rich network resources. Especially in north China, as a major operator, we have absolute advantage in last one kilometer access.

In terms of international networks, CNC joined 26 international under-sea and land cable cooperation organizations, connecting 73 countries and 87 international telecom operators. We have 18 international POP points. CNC now has 123 million local telephone users, 13.3 million broadband access customers and over 70 thousand big clients covering all industries.

Now we are facing pressure from market and technology. The profit is decreasing and the market shares and revenues are decreasing. From 2003 in China, the revenue of mobile operators exceeded fixed line operators and the number of mobile subscribers exceeded that of fixed subscribers. There is a clear trend of mobile-fixed substitution. In the front of Internet, the emergence of new technologies such as P2P and SKYPE start to divert to the traditional telecom market and they start to affect the traditional business model of the entire telecom industry.

In face with challenges, CNC is still in possession of certain advantages.

However, to better play out the advantages and actively face the challenges, innovation and transformation is inevitable.

CNC initiated its three pillar strategies as early as 2003, namely the

Broadband Strategy, the Olympics Strategy and the Internationalization

Strategy. The three strategies are complementary to each other and the core and soul of them is “broad”. By implementing the Broadband Strategy, we wish to upgrade the infrastructure from a narrow-band network to a broadband network, and transform its business focus from access to content.

By implementing the Olympics Strategy; CNC will bring into full play its role as the official partner of Beijing Olympics to make the Olympics 2008 the first

Broadband Olympic Game ever in the history of both Olympics and communications, providing high-speed network, broadband access, integrated services, a variety of applications and border services. By implementing the Internationalization Strategy, CNC introduces advanced technology and managerial expertise, and at the same time explore the world telecom market with its high-quality broadband service so as to shape and consolidate CNC’s dominant position in the broadband market of the Asia

Pacific region. In summary, we are dedicated to build CNC into a broadband communications and multimedia service provider that boasts a wide range of applications, high quality of service, stable network operation, sound corporate governance and coordinated and sustainable development.

With regard to Broadband Strategy, CNC is promoting network evolution in a phased and planned way with the purpose of migrating to the next generation of network that are converged, broadband and intelligent with clear network layers, flexible and multiple services and complete technology system.

ƒ Establish the long-distance intelligent optical network, the long-distance soft switching commercial network, the completed IP double-planed backbone network and the access network which is able to provide integrated information service, with the supporting capacity for the multi-services, such as NGN and 3G;

ƒ CNC has taken an active part in the test and study of the CNGI (China

Next Generation Internet) demonstration network to promote industrialization and localization of IPV6. CNC is responsible for building 5 core nodes in the CNGI application demonstration project.

ƒ Together with research institutes and equipment vendors, we have built the National Lab on the Next Generation Broadband Service

Applications. This is the first national lab of its kind built by a telecom operator in China. As a result, CNC is a step ahead in the R&D and application of new technologies and products.

With regard to the service innovation, the single voice service is transformed into the integrated information service with the integration of multi-networks, multi-terminals and multi-services, as well as the extension of the value chain.

• Firstly, Speed up the reconstruction of the intelligent local network and provide large amount of new services and value-added services based on the fixed network. Such as the Coloring Ring Back Tone, SMS, One

Number Links You, Number Portability and Call Center, etc.

ƒ Secondly, the broadband value-added services. Speed up the development of various informational application service, such as egovernment and e-commerce, video monitoring service and informatization for the small and medium-sized enterprises. In order to follow the trend of the convergence of the three networks, CNC has explored in the development of many aspects, such as IPTV. The portal website of “CNC MAX” has been opened. CNC has cooperated with hundreds of the content and application providers in the aspects of information, games and entertainment, movie and music, education and medication, e-commerce and e-government. And successful experiences have been gained in the aspect of live video.

ƒ Thirdly, actively promote the fixed mobile convergence (FMC) and conduct the combined and bundled sales of multi-services and multiproducts. At present, CNC has been promoting its new services bundled with fixed-line voice service, which has not only retained the existing voice users but also increased the income of PHS and broadband business.

Regarding service innovation, CNC always sticks to the philosophy of

“Service Creates Value”, and has created diversified service system:

1. To offer corporate customers perfect experiences in the whole process through CNC MAX applications;

2. To fractionize customer group, to provide diversified, personalized, and customized services, and “One stop” services;

3. To strengthen the development of complimentary service, providing such services as customer network management, adapting ourselves to the trend of informatization.

With years of efforts, CNC has ranked No. 1 for 4 consecutive years in the regular National Survey on the Satisfaction of Telecom Subscribers published by the Government.

Today, with the rapid development of ICT, standardization plays a significant role in promoting the development and application of advanced technologies and even world economic growth. The harmonized international standards not only accelerated the development of new services but also prevented the market from breaking up. With the fast development of different ICTs, we hope standards-setting bodies play stronger roles in harmonizing the

standards. China Netcom will take an active part in the development of international standards.

In the past half a century, ITU-T played a major role in developing and harmonizing telecommunication standards. As a sector member of ITU-T,

CNC always keeps a close eye on the telecommunication standardization process and regards the active participation in the development and study of related standards as a major move in technological innovation in a bid to play an important role in the international standardization process. CNC always gives top priority to the role of indigenous IPR in an enterprise and makes great efforts to improve indigenous IPR management system and establish a group-level management system for technological R&D innovation.

Recently, we are pleased to be informed that ITU-T has set up a Focus

Group on IPTV, aiming at coordinating and promoting the draft and establishing work on global standard for IPTV. CNC will actively participate into the development of ITU-T IPTV standard, trying to make contributions to the healthy development of IPTV.

Ladies and gentlemen, dear friends,

The splendid achievements of ITU-T and former CCITT guarantees the healthy and vigorous development of telecommunication industry around the globe, while provides stable fundamentals for the development of telecom carriers. As one of China’s major telecom operators, CNC will continuously support ITU, and also has the duty, the ability and the confidence to play a bigger role in technological development, application promotion and standards development and make greater contribution to the harmonized growth of global telecom industry.

Lastly, wish the conference a complete success.

Thank you.