Zhou Deqiang
1941–



Chairman of the board and chief executive officer, China Telecom

Nationality: Chinese.

Born: 1941.

Education: Nanjing Institute of Posts and Telecommunications, BS, 1968.

Career: Beijing Long Distance Telephone Bureau, deputy chief engineer; Anhui Posts and Telecommunications Administration, deputy director general, director general; Ministry of Posts and Telecommunications; Ministry of Information Industry, vice minister; China Telecom, 2000–, president, chairman, and chief executive.

Address: China Telecom, 33 Er Long Lu, Xicheng District, Beijing 100032, China; http://www.chinatelecom.com.cn.

■ In May 2000, after more than 30 years' experience in various local and national branches of China's telecommunications industry, Zhou Deqiang went from a high governmental post in the Chinese Ministry of Information Industry to a chief position at China Telecom, the communications giant founded in 1994 and repeatedly restructured since then to meet the guidelines of the World Trade Organization (WTO), which China had joined in 2001. Zhou was one of the key figures in the process of creating a competitive market in telecommunications and thus facilitating the country's economic adaptation as a recent member of the WTO. Despite the restructuring of China Telecom to break up its monopoly in the industry, the company remained a dominant presence in the market and retained strong ties to the Chinese government—its top officials were former ministry employees, and Zhou continued to be part of the government structure. Zhou was also at the helm of developments and expansion of services provided by China Telecom, which was still largely regarded as an expensive and inefficient provider.

FROM ENGINEERING TO ADMINISTRATION

Born in 1941 in China of the Han nationality, Zhou studied engineering at the Nanjing Institute of Posts and Telecommunications. The institute, also known as Bei You, belongs to the group of the "you" schools, that is, posts and telecommunications colleges. While these schools were known for weak management departments, the academic standards of the engineering departments were higher—the result being that management graduates ordinarily landed staff jobs in post offices while some engineering graduates reached top administrative positions in the nation's telecommunications industry. Zhou received a bachelor's degree in wireline telecommunications engineering in 1968; however, on China Telecom's Web site, he was listed as a professor-level senior engineer.

Like most of the institute's graduates, Zhou began his career working for the national telecommunications industry; he was the deputy chief engineer for the Beijing Long Distance Telephone Bureau. Later he moved to Anhui province and to a position at the Anhui Posts and Telecommunications Administration, where he served as deputy director general and later director general. While very little information is available on Zhou's work in these institutions, the local and province posts led him toward an appointment in the top government sector of telecommunications regulators at the national level—namely, the Ministry of Posts and Telecommunications.

POSITIONS AT THE MINISTRIES

Zhou worked at the Ministry of Posts and Telecommunications (MPT) until the administrative reshuffling that took place in 1998 in which the MPT, in charge of network standards and access, was merged with the Ministry of Electronics and Information, overseeing computers and software. The resulting division was the new Ministry of Information Industry (MII), a government agency in charge of telecommunications, broadcasting, multimedia, satellites, and the Internet but no longer responsible for postal administration and the telecom trunk line network. The postal services were thus separated from China Telecom (a giant, nongovernment-backed company) and taken in by the MII. The establishment of this agency coincided with the government ruling in March 1998 establishing a new telecommunications law that would change the regulation of the market and create competition and a customer-centered environment—both qualities needed for China's entry into the World Trade Organization (WTO).

The new ministry was set up with the goal to ensure fair competition in the telecommunications and information services markets, promote quality service, and draft regulations for interconnection and the settlement of telecom networks nationwide. Zhou was appointed vice minister. At the MII, Zhou's duties consisted of overseeing three key departments within the new ministry: the Telecommunications Administration Bureau, the Radio Regulatory Department, and the Department of Policies, Laws, and Regulations. As vice minister Zhou was a crucial figure in the developments of the Chinese telecommunications industry, specifically the restructuring of China Telecom in 1998 and its fragmentation and subsequent formation into separate companies in 1999 and early 2000. He was also in charge of the 1999 action to promote China's mobile phone producers and take back a chunk of the market from foreign companies, with the goal of giving the domestic companies an increase in the market share from 5 to 50 percent.

At this time, the focus of the ministry's work was to restructure the Chinese market to fit the requirements of the WTO and provide a competitive environment in the nation's telecommunications industry. Zhou's prior administrative experience with telecommunications networks at local and province levels, as well as his nationwide perspective from his years at the MPT, proved very useful in his new responsibilities at the MII in developing the country's telecom industry to meet WTO standards. However, since the MPT had used its political power to ensure China Telecom's dominance on the market in the past, the question was raised as to whether the members of the new ministry would continue with the same trend despite government regulations.

THE MII AND CHINA TELECOM

Like the MPT before, the MII was also closely linked with China Telecom—the giant company monopolizing the country's telecommunications industry and the world's second-largest telecommunications provider, with 100 million users in 1997 within a rapidly expanding market. China Telecom was established alongside China Unicom (a much weaker competitor on the market) in 1994, when Zhou was already active in the MPT; China Telecom was created in the wave of business modernization as an independent company that owned all public telecommunications and was thus heavily regulated by the ministry. In early 1998, after the Chinese Communist government passed a regulation promoting market competitiveness, the MPT stepped in to protect China Telecom's monopoly over the market from its rival, China Unicom; later that year the ministry was reorganized into the MII, but the question remained as to whether the old policy would be continued by the new agency, since the same people held key positions—Zhou included.

The restructuring of China Telecom that took place in 1998 (with the newly formed MII agency taking up its charge of postal services) and the breakup in 1999 (with the separation and formation of four new state-owned companies out of the main provider) were steps taken to enhance market competitiveness; nevertheless, China Telecom remained a dominant presence in the industry. Critics of the country's business development noted that China Telecom remained dominant in the industry despite the government regulations, which included reorganizing the company itself as well as giving regulatory advantages to its smaller counterparts. During his years at the MII, Zhou oversaw the ministry's absorption of postal services from China Telecom in 1998 and the separation of four groups from its services to begin forming new companies. The same year, the ministry approved an advantage for China Telecom's main competitor, China Unicom, by granting it an exclusive license as developer and carrier of Internet and Internet service provider services for the entire Chinese market. By early 2000 Zhou had overseen the establishment of China Mobile and China Satcom, two of the spin-off companies drawn out of China Telecom, as well as the establishment of the fixed-line market rival China Railways Communications (also known as Railcom). Competitors were allowed by the ministry to charge up to 50 percent less for their services than China Telecom in an effort to encourage the formation of a customer-oriented market. Still, despite the occasional low, China Telecom continued to dominate the nation's industry.

Zhou's position in the ministry gave him an insider's view in the functioning of China Telecom and administrative power in decision making with the goal to create a balance between the giant and its considerably weaker competitors while apparently ensuring the company's strength throughout transitions toward the modernization of the market. Zhou's involvement with the company's contacts and familiarity with the ministry regulations concerning the development of the telecommunications industry during this time period would eventually prove highly useful; in 2000 Zhou became the CEO of China Telecom.

LEADERSHIP OF CHINA TELECOM

Zhou was appointed chairman of the board and CEO of China Telecom in May 2000. His move from the government to the independent sector may have been controversial, but it was not at all unusual in the Chinese business world: during the late 1990s various companies formerly associated with the relevant ministries branched off and became independent businesses, and the administrators followed the trend, as the nation's industry prepared for the entry into the WTO. Still, Zhou's appointment raised the issue of China Telecom's continuing monopoly of the telecommunications market, unchanged despite the restructuring and fragmentation the company had undergone in the previous years.

In the past, the ministries (MPT and later MII) had provided very favorable conditions for China Telecom's rule of the market, from privileged policies to tax breaks; however, ministry officials maintained that they had done a good job regulating the entire national industry. While the skyrocketing developments in the market nationwide were indeed supportive of this evaluation, there were also stories of consumer displeasure with the conditions—such as the legal case brought by three students who sued China Telecom because their telephone cards could not be used outside the zone in which they were purchased. The country's membership in the WTO, the international business regulations thereby applied, the influx of foreign capital into the country's businesses, and the presence of an independent regulator (as opposed to the previous highly biased ministries) were all indications that the market would develop into a truly competitive environment.

The new market conditions, along with state-imposed reductions in service fees that depleted the company's financial resources, demanded a more aggressive policy for the future. China Telecom obtained some financing through the capital market in 1997, when it listed a part of its assets on the Hong Kong Stock Exchange. In 2002 Zhou began negotiations for Merrill Lynch and Morgan Stanley to bring China Telecom to the global stock market, selling 20 percent of the company's shares; however, the U.S. estimates of the stock's value in existing conditions and the falling value of telecommunications business in both Asia and the United States did not meet the projected figures, and the plan was postponed. In addition, China Telecom underwent yet another restructuring in 2002, being reorganized into two geographically determined groups: China Netcom Communications Group Corporation in the northern provinces and China Telecom Corporation in the southern provinces.

The company CEO's focus, though, remained on future development, such as acquiring a mobile license—mentioned in 2002 as a possible expansion on the market. Maintaining a positive political profile, Zhou also appeared and spoke at a gathering of the Chinese Communist Party in Beijing, described as a public justification for letting private business leaders into the party. While Zhou's speech mostly served to entice investors' interest in China Telecom's public offering, he also spoke about the "important thought of the Three Represents," a reference to the Chinese Communist Party's policy idea allowing an embrace of capitalism ( Taipei Times , November 11, 2002). However, Zhou's enthusiasm for China Telecom's development sometimes demanded retractions from the more cautious public relations arm of the company: after the China Morning Post printed that Zhou had suggested China Telecom was looking into buying five provincial networks from its parent group in the months after the company's stock exchange listing, the official press release denied any concrete plans to do so.

In the long term, Zhou's leadership of China Telecom included an internal restructuring of the company that consisted of several administrative projects: centralized financial management, internal control system, corporate governance, business process reengineering, and development of investor relations—for which China Telecom was recognized in June 2003 as the country's most improved company in investor relations.

See also entry on China Telecom in International Directory of Company Histories .

sources for further information

"Business Heads Turn Cautious at Meet," Taipei Times , November 11, 2002.

Chan, Elaine, "Broadband Boost for China Telecom," Standard , September 12, 2003, http://www.thestandard.com.hk/news_detail_frame.cfm?articleid=41762&intcatid=1 .

Kwok, Ben, "China Telecom Plays Down Talk of Network Buy-up from Parent," Financial Times (from South China Morning Post ), October 28, 2002.

Kynge, James, "Cell Phone Groups Face Big Cut in China Sales: Quota Plan Designed to Give Local Manufacturers 50% of the Market," Financial Times , November 1, 1999.

"Team at the Top Brings in Wealth of Experience," Financial Times (from South China Morning Post ), November 15, 2002.

—Jeremy W. Hubbell



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