There are few more quintessentially American companies than telecom firm AT&T, but overseas business has been a crucial plank for the company’s growth for years. AT&T has been active in China for more than two decades, primarily providing data services to multinational firms with operations on the mainland. AT&T broke new ground in China in 1999 by forming its UNISITI joint venture, the first joint venture by a foreign telecom firm on the mainland. Despite the current economic crisis AT&T is continuing to invest overseas – the firm recently announced a US$1 billion investment in its global operations. AT&T’s general manager for the Greater China Region, Sainti Li, spoke to CHINA ECONOMIC REVIEW about the expansion, and how AT&T is helping its clients manage costs during the crisis.
Q: Can you explain to us what AT&T does in China?
A: AT&T is a popular name in mainland China, with over 25 years in the market. In fact, a lot of older generations will remember AT&T from our telex telegraph services. What we’re doing now in mainland China is exactly what we’re doing in most parts of the world outside the US – serving our global enterprise customers. Over 300 of our customers have come here because of their manufacturing bases or because they’re tackling the retail market here. On a basic level, our work is focused on virtual private networks (VPNs). Our customers have operations around the world and they want to be able to share data securely and reliably. We provide services, account management, customer care and operational support – just like they have back in their hometowns in the US or any other part of the world. Of course, in China, we can’t roll out our global seamless products without a license, so we work with local providers such as China Telecom and China Netcom. We also have UNISITI, which is a joint venture between AT&T, Shanghai Telecom (STC) and Shanghai Information Investments (SII). We are now extending our services beyond the standard global connectivity services to custom network integration. We help customers assess the design of their network, assess the design of some products, and recommend different solutions.
Q: How are you helping your consumers contend with the global crisis?
A: One area is cloud computing. It’s been talked about for quite a long time, but now it’s a reality. Virtually no industry has flat demand – there are always spikes. If you are in retailing or manufacturing for example, there are going to be spikes in demand during the Christmas period. What tends to happen is that customers buy the resources to meet those spikes but it means that for maybe 80% of the year they’re only using 20% of the resources. So rather than buy that amount why not just buy the level that you need? You just pay for 20% 10 months of the year and turn it up when you have those spikes. This means our customers can quickly scale up or scale down their business in any area they want. The other thing companies are doing to cope with the economic downturn is outsourcing many of their IT services and solutions. For example, last year Royal Dutch Shell outsourced its entire global network telecom services to us, a US$1.6 billion deal. While Shell is a European multinational, the deal has implications for us in Asia as well.
Q: What kind of growth have you seen in your China operations?
A: Last year our Greater China business grew by about 20%, while Asia Pacific topped 12%. India grew 27%, mostly because the Indian government changed the regulatory environment and allowed foreign firms to own 74% of a joint venture. This means we’ve been able to go into the market, sign contracts, and service and deliver everything directly.
Q: AT&T this year announced a US$1 billion investment in its global business. How much will be allocated to China?
A: We don’t break down our investments by country or region because all the services we offer in mainland China are global services. A lot of applications or services that we put on top of the network are intended to turn us into a network solutions company, not just a network service company. Many customers are talking to us not just about how to reduce costs, but how to increase productivity. So, for example, there’s a special box that we can add to a customer’s location that uses the current bandwidth more efficiently. Some of the US$1 billion will go toward undersea cables, such as the Trans-Pacific Express, which will run between China and the US, and the Asia-America Gateway. We will also be rolling out new video conferencing services like "Telepresence," which will be a big growth driver this year, and a slightly more cost-effective version called "AT&T Connect." This is a web-based conferencing tool with almost no upper limit – you can have 30,000-40,000 people using it at once. It’s very interactive, so there’s a web tool that lets you share a whiteboard, share presentations, share desktop applications.
Q: Why do you think Telepresence is going to be a big growth driver for AT&T?
A: Video is going to be the source for much of the traffic in the pipe in the future. It needs a lot of bandwidth and the equipment is not cheap. With Telepresence your video conference rooms in Hong Kong and New York look exactly the same, there’s no delay, it’s literally like you’re sitting across the table.
Q: This has to be very expensive. How do you convince companies to pay for this during these times?
A: According to forecasts by consultancies like Gartner, the application could replace over 2 million airline seats a year. This solution can help companies work faster by cutting down on travel costs. Some of these meetings that would normally have to be conducted face-to-face, 80-90% of those can now be simulated via a Telepresence meeting.
Q: Have you installed any in China?
A: We have already installed some for customers, but unfortunately we cannot name them yet. There will be different ways for customers to acquire Telepresence technology. Some will prefer to buy their own equipment and use our network, while others, typically those with strong IT capability, might even want to manage it themselves. But a lot more customers will rely on us to provide a turnkey solution including equipment.
Q: What challenges do you continue to face in the China market?
A: Mainland China is still a regulated country in terms of telecommunications and you definitely have to work very well with the local players. You need to build relationships from time to time with different provinces and there is no way to bypass those local players. They are different companies with different processes and their own investment plans, and you have to convince them to give you the best support. This can’t be done without very good long-term relationships.