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AsiaInfo sees growth as revamped China carriers clash

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CIOL Bureau
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Tony Munroe and Jonah Greenberg

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BEIJING: AsiaInfo Holdings Inc., which sells software and services to China's

telecommunications firms, expects demand to grow as the country's two fixed-line

giants move faster than expected to poach each other's customers.

AsiaInfo also planned to expand its target market beyond telecom by the end

of this year, probably through acquisitions, James Ding, AsiaInfo's 37-year-old

chief executive, said in an interview on Monday.

Ding said China's two reconstituted fixed-line giants, formed in May along

north-south lines as part of a massive restructuring of the telephone industry,

were already planning incursions onto each other's turf. "The key impact,

which is quite a surprise to many people, is that they're very actively planning

for the expansion into each other's parts," Ding said.

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Southern carrier China Telecom, which ceded its 10 northern provinces and

cities to upstart China Netcom Group, had "already started bidding plans

for some of their projects to help build the local data networks in the

north", he said.

"It's much faster than we thought," Ding said in his office in the

western part of Beijing where many of China's young technology firms are based.

"It means a lot more opportunities," the mild-mannered Ding said.

"It's very encouraging for us."

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Restructuring begets competition



AsiaInfo, along with sellers of hardware to China's telecom sector, had been
frustrated as the restructuring of the creaky fixed-line sector dragged on

longer than expected.

And many industry watchers questioned whether the decision to split

near-monopoly China Telecom along geographical lines would do anything to boost

competition. But Ding said the two carriers would go after high-end business

customers in each other's markets, offering services such as broadband

connections. "Probably Netcom will be a bit more aggressive," he said.

Before being merged along with Jitong Communications into the 10 northern

China Telecom provinces, China Netcom operated a high-speed data network, which

it retained in the restructuring. "Netcom will have a better starting point

because they already have a lot of the infrastructure in the southern part

anyway," Ding said.

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Beyond telecom



Ding said AsiaInfo, which also provides systems integration services and
gets all of its revenue from the telecom sector, intended to tap other markets

by the end of the year, starting with the finance, insurance and power sectors.

"We believe that definitely we will go beyond telecom by the end of the

year," Ding said. Revenue from non-telecom sources could account for 20-30

per cent of turnover by 2004, he said, but declined to identify potential

acquisition targets.

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Ding said the company had no current interest in seeking business beyond

China. "We see our counterparts in the US are getting hit pretty

badly," he said. "It's not very attractive outside China right

now." Ding cited the woes of US-Israeli telecom software firm Amdocs, which

said last week it would cut up to 1,000 jobs, or 10 per cent of its workforce,

and slashed its revenue targets amid a dismal telecom spending environment.

AsiaInfo, due to report second quarter results on July 24, has said it

expects net revenue to grow by roughly 20 per cent year-on-year to US$19.5-$20

million, with net income of between $3-$3.5 million, or seven-to-eight cents per

basic share.

(C) Reuters Limited.

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