Chinese company expands to tap demand for internet in underdeveloped areas

Yangtze Optical Fibre and Cable Joint Stock Co Ltd, the world's largest optical fiber cable manufacturer by output, is expanding its global market to regions where telecommunications are underdeveloped.

The move follows its initial public offering in Hong Kong in December 2014 and the setting up of joint ventures in Myanmar, Indonesia and South Africa.

In January last year, Yangtze Optical Fibre signed a joint venture agreement with Indonesia PT Monas Permata Persada to establish a factory in Indonesia.

The venture was set up with an initial capital of $10 million, with the Chinese company holding a 70 percent stake. It is the first of its kind in Indonesia, and Yangtze Optical Fibre's first overseas.

Indonesia's population of 252 million is the fourth-largest in the world. Yet internet use and broadband penetration are relatively low due to the slow development of the nation's telecom industry. The Indonesian government recently introduced a national broadband plan.

In March last year, Yangtze Optical Fibre set up a joint venture in Myanmar with a local optical fiber cable producer to output 1 million kilometers of cable a year.

"We consider three factors when investing abroad," says Zhuang Dan, president of the Chinese company. "First is the economic development, which has a great bearing on the demand for broadband. Second is the growth potential of the internet, broadband and mobile. Third, the country's population has to be relatively large."

Myanmar and Indonesia fit the bill, he says, adding that the next focus of overseas expansion will be Africa.

Established in 1988, Yangtze Optical Fibre was formed by three partners: the China Huaxin Post and Telecommunication Economy Development Center, Wuhan Yangtze Communications Industry Group Co Ltd and Draka Comteq, which is based in the Netherlands. Its portfolio mainly covers fiber preform, optical fiber and cable.

The company is the largest fiber raw meterial supplier and the second-largest optical fiber and cable supplier in the world. Its products are sold to more than 50 countries, and it has 22 offices overseas.

Yangtze Optical Fibre's joint venture in South Africa was its first project in Africa. It will also establish a bonded warehouse in South Africa to sell optical fiber cables imported from its China factories to the rest of the continent.

The project is in Johannesburg and the initial planned production capacity is 1 million km a year. It will start operation in the fourth quarter of this year and is expected to become a base for Yangtze Optical Fibre to cover the African market.

Richard Mack, chief analyst at CRU, a consulting firm on global commodity industry pricing, says the top three regions in terms of demand for optical fiber cables are Southeast Asia, Africa and Latin America.

They are also net importers of optical fiber cables. Of the more than 100 countries in these regions, only 12 have their own optical fiber cable manufacturers.

Total demand in the three regions in 2014 was 30 million km, only 20 percent of China's demand in the same year, Mack says. Yet they have great potential for growth as operators update telecom networks to improve their fixed and mobile broadband services.

He estimates the annual growth rate in the next five years in the three regions will be more than 10 percent.

Zhuang adds that he believes the optical fiber cable market in China and abroad has great potential for growth thanks to "national initiatives for the convergence of the telecom, internet and broadcasting networks" and the government's Internet Plus strategy.

yangziman@chinadaily.com.cn