Online Extra: "Survival of the Fittest" in China Netcom

CEO Edward Tian discusses the challenges of running the state-owned telco and the 50% business and 50% politics balance it entails

As chief executive of China Netcom, the country's second-largest fixed-line carrier, 42-year-old Edward Tian has learned the delicate art of keeping foreign investors happy while answering to the company's ultimate majority shareholder, the Chinese government. U.S.-educated Tian -- he has a Ph.D. in resource management from Texas Tech University -- made a fortune in the private sector after the company he founded, AsiaInfo, went public on Nasdaq, before joining one of China's most important state-linked companies in 1999.

He recently spoke with Frederik Balfour, BusinessWeek's Asia correspondent, about the challenges of running the company and the future of the Chinese telecom industry. Edited excerpts of their conversation follow:

Q: How did you get involved with China Netcom?


The four state shareholders -- the Ministry of Railways, the Shanghai government, the Chinese Academy of Sciences, and the State Administration of Radio, Film & Television -- said they wanted an outsider. They said: "You know how to run a business, why don't you do something for your country?" I couldn't say no.

Once I joined, I found myself on a train I couldn't control, going faster and faster -- it became part of the Chinese company reforms. Life became very difficult with four state shareholders and regulations and competition from China Telecom. But I majored in ecology, and evolution taught me about the survival of the fittest.

Q: How did you deal with different stakeholders?


Jiang Minhang [son of former President Jiang Zemin] was a shareholder from the Chinese Academy of Sciences. He was a good director and had something in common with me -- we both studied in the U.S. But the first year was a disaster. I was a CEO, but they didn't give me a directorship because all directors must be ministerial level.

I had to wine them and dine them and not let them color me as the foreign-educated Chinese guy with money. That was a handicap. I had to give up my U.S. green card to run this company. You have to become part of them, with a company car and driver. I have an Audi A6 2.4 liter class. Every senior official drives these. Directors drive 2.6 liter versions.

Q: Do you regret having left AsiaInfo?


I don't know. I'm often wondering because a friend of mine, a professor, says India is better at promoting entrepreneurs and world-class companies, but the [Chinese] government always controls large companies. The private sector can only go so far. I'm from private enterprise and learned the skills of surviving in a large state-owned enterprise. That's a 50% business and 50% politics balance.

Q: What made you decide to take a 20% stake in PCCW [a Hong Kong telco] earlier this year?


We lack innovation and management knowhow, which are hard to find in China, where all telecom operators are state-controlled. Hong Kong is very competitive. The people assets are very important. We also have control of Asia Global Crossing [purchased when Global Crossing went bankrupt] and can work with them on that.

Eventually we will form a joint venture with them -- PCCW -- in Southern China where we aren't strong. [China Netcom only has operations in the north, China Telecom has the south.] We also have a lot of buildings and land, the legacy of a telco, which we can sell to PCCW Property and let it manage them for us. In Beijing we have more than 2,000 buildings, even a five-star hotel. It's stupid. We want to sell that.

Q: What's your relationship with board member Rupert Murdoch?


He became my mentor. Whenever I get frustrated, I read his [biography]. I cannot let him down.

Edited by Patricia O'Connell

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