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As the smallest of the top-four telecom companies, China Netcom may seem increasingly vulnerable at a time when voice goes mobile and price wars are rampant in the competitive telecom industry.

 

Yet Zhao Dongming looks to a steady revenue stream that could help Netcom stay viable.

 

"We are putting a bet on big clients to alter the competitive landscape," says Zhao, deputy general manager of Shenyang Netcom, a subsidiary of listed China Netcom Group Corporation (Hong Kong) Ltd.

 

By saying "big", Zhao is referring to corporate customers that generate higher average revenues per month (ARPU), a major barometer in the telecom industry.

 

Shenyang Netcom offers fixed-line telephone services and Internet access in the capital city of Northeast China's Liaoning Province.

 

"Individual consumers (in Shenyang) usually mean an ARPU of about 40 yuan, but each employee with our corporate customers can generate an ARPU of 120 to 200 yuan solely from fixed-line voice calls," says Zhao.

 

Heightened focus on corporate customers marks a strategic shift for Netcom, which is now coping with hard-charging competition from cellular operators China Mobile and China Unicom, as well as from much larger fixed-line rival China Telecom.

 

The smaller fixed-line carrier China Tietong is also eroding Netcom's turf through price wars.

 

"Corporate customers offer a stable revenue stream," says Zhao. "If you can manage to retain the corporate customer base, you can grasp the initiative in an increasingly competitive telecom market."

 

By 2006, Shenyang Netcom had 2.35 million fixed-line subscribers and 560,000 broadband Internet users, but the list of corporate customers is much shorter. Still, 1,652 big clients contributed 350 million yuan to Shenyang Netcom's revenues last year, accounting for 13 percent of the total.

 

The competition to sign such customers is intense. Tietong sometimes even offers half-price discounts to woo corporate customers. And China Mobile and Unicom are also entering the corporate market as some companies switch to mobile phones to create a mobile workforce.

 

"The major key is to offer better service as customers really care about (telephone and Internet) network stability," says Zhao, adding Shenyang Netcom has invested extensively in network maintenance capability.

 

By 2006 it employed about 3,500 people, 65.7 percent of whom are working in marketing and services. In April last year it created a 19-strong "big customer response center" and now the headcount has more than doubled. The center promises to fix network problems for corporate customers within four hours.

 

Improved service is creating new business growth, according to Zuo Xunsheng, chief executive officer of China Netcom. At a time when products are barely different from one another "the competition between operators is focused mainly on services," he says.

In the past two years China Netcom established "big client" divisions and taskforces to develop a bigger corporate customer base.

 

"In some cities, corporate customers could provide half of Netcom's revenues," says Wang Yuquan, a consultant at research firm Frost&Sullivan (China).

 

In bigger cities such as Shanghai and Beijing, which are home to a large number of big companies and multinationals, the ARPU from corporate customers is believed to be even higher.

 

"That's really a hot market every operator is eager to crack," says Wang.

 

The corporate market is crucial for fixed-line carriers China Netcom and China Telecom, which have yet to get a license to provide mobile phone service in the country, he adds.

 

(China Daily March 19, 2007)