On September 10, 2008, the PRC State Council issued the revised Provisions on the Administration of Foreign Invested Telecom Enterprises, the Revised Provisions). The Provisions revise the old provisions from 2002 (the Old Provisions), and represent the Chinese government’s efforts to gradually open its domestic telecom market to foreign investors.
Noticeably, the Revised Provisions lower the threshold requirement of a foreign-invested telecom enterprise’s (FITE) registration capital in China. If an FITE offers basic telecom services nationwide or across provinces, the minimum amount of required registered capital is halved to RMB1 billion. If an FITE only offers basic telecom services in one province, the minimum is halved to RMB100 million. If an FITE offers added-value telecom services, the registered capital minimum remains the same at RMB10 million for providers operating nationwide or across provinces, and RMB1 million for providers operating in one province.
Before engaging in basic telecom services or cross-provincial value-added telecom services, principal Chinese investors must seek approval from the governing authority under the State Council, namely the Ministry of Industry and Information Technology (MIIT) (formerly called the Ministry of Information Industry). Unlike the Old Provisions, however, the Revised Provisions no longer require the applicant to submit a feasibility study report with its application.
The Revised Provisions also include updated references to relevant government authorities in line with the reorganization and subsequent name changes of government departments in China in recent years. For instance, the departments that originally issued approval certificates to foreigninvested enterprises were referred to as “international business and economics departments” in the Old Provisions, but have been changed to “commerce departments” in the Revised Provisions.
Unlike the Old Provisions, the Revised Provisions no longer require domestic enterprises to obtain the consent of the MIIT before listing overseas.
The Revised Provisions keep the Old Provision requirements that foreign investors in an FITE may hold no more than 49 percent of the FITE’s equity if the FITE provides basic telecom services, and no more than 50 percent if the FITE provides added-value telecom services.
At present, foreign investors have invested in all of China’s major telecom service providers except China Telecom. Industry insiders have viewed the issuance of the Revised Provisions as a signal that China is taking steps to fulfil its WTO commitment of gradually opening up its telecom market, but the industry insiders also call for more specific rules in the implementation of these provisions.