China's second largest fixed-line telephone operator has refuted a rumour that a business split is under way within the company.

"We are now engaged in syncretizing our inner business resources to sharpen our competitive edge," a China Netcom Corp official said on condition of anonymity.

"But we don't have an exact timetable when the business conjunction within the company will be completed."

However, he revealed that a statement concerning a merger plan is likely to be released later this week.

Since its debut in May last year, incorporating 10 provincial branches of the former China Telecom and two independent carriers - the China Network Communications Co Ltd and Jitong Communications - Netcom has kept a low profile and focused on internal readjustment.

The company recently moved into the limelight when the former Information Industry Vice-Minister, Zhang Chunjiang, became a member of the Netcom team. On April 23, he was appointed general manager.

Since then, speculation has been rife that Zhang is trying to turn the group into a shareholding company and divide its business into three independent subsidiary shareholding companies focusing on business in the nation's north and south and abroad.

It is claimed the three companies will all be controlled by Netcom.

It is also reported that by the end of August, the business association with China Jitong will be finished.

A source said Netcom's merger with China Networks Communications will be completed by the end of the year.

Analysts believe Zhang is facing an uphill battle to readjust the group so it can remain competitive in the Chinese market.

Netcom had a revenue of 68 billion yuan (US$8.2 billion) last year. While the other big telecom operators like China Mobile, China Telecom and China Unicom each hit a revenue of 163.7 billion yuan (US$19.7 billion), 149 billion yuan (US$17.9 billion) and 50.8 billion yuan (US$6.1 billion), respectively.

However, latest figures show that China Unicom is likely to outshine Netcom in the second half of this year.

Another reason Zhang is with Netcom, it is claimed, is to prepare it for going public.

Netcom is the only company which has not gone public among the four major telecom operators.

In the south, Netcom has established 15 shareholding companies and has a 60 per cent controlling stake.

There is speculation that the 10 provincial branches and Jitong Communications will run Netcom's northern operations.

Netcom's three parties' overseas business will be combined together to compete with global telecom operators.

In an earlier interview with China Daily, Leng Rongquan, vice-president of Netcom, said the group needed more time to consolidate its internal structure and it would rather wait for a more friendly environment in the international capital market before going public.

Zeng Jianqiu, a professor with the Beijing University of Posts and Telecommunications, said Netcom should not rush into the overseas capital market before it is fully prepared and the environment is more friendly towards telecom shares. The company has a fixed asset worth 220 billion yuan (US$26.6 billion) and a staff of 210,000 people.

It is widely believed that Netcom and China Telecom will each get a mobile telecom licence from the Ministry of Information Industry later this year or in 2004.

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