American Telephone & Telegraph Co. has signed an agreement with the People's Republic of China calling for the development of a program to share technology and sell telecommunications equipment, AT&T Chairman Charles L. Brown said yesterday.
Brown, who returned Saturday from a two-week Far East trip that concluded with six days in the PRC, said the preliminary pact is designed largely to help develop the local Chinese phone system. "It is very clear they have electric power and communications on the top of their priority items," Brown said, calling telephone service there "pretty bad."
Noting that the country of just over one billion people has only 1.2 million telephones, Brown said the PRC needs telecommunications equipment but is unlikely to purchase large amounts of it soon. "It's very clear they want the technology, and they want to do it themselves," he said.
AT&T's China connection, disclosed by Brown during a meeting with editors and reporters at The Washington Post, represents a potentially significant milestone in what has so far been the relatively quiet and methodical development of AT&T International, a subsidiary set up to build the company's limited overseas presence.
Now represented in 15 countries, with sales offices in 11 of those, AT&T International has announced relatively small sales and purchasing deals. The most notable so far is a preliminary agreement for a joint venture with Philips N.V., the giant Dutch electronics company, to manufacture digital switching systems.
But the Chinese government's interest in working with AT&T also is further demonstration of that country's mounting focus on upgrading its telecommunications system, a program that could be worth billions of dollars to the world's leading telecommunications concerns.
Officials of International Telephone & Telegraph Co., for instance, confirmed yesterday that a Belgian ITT susbsidiary, Bell Telephone Manufacturing Co., will be part of a $240 million joint venture with the PRC government to build a plant in China and supply some 100,000 telephone lines as part of the same pact. A spokesman for GTE Corp. said that company has sold small amounts of telecommunications equipment in China and suggested the company expects to do more business there. Similarly, AT&T has installed three major sophisticated switchboard units in Peking.
According to an AT&T spokesman, the AT&T-PRC pact reflects a desire by the two parties "to build upon existing relationships to determine if it would be feasible to cooperate in fellowship programs, technical exchanges, and upgrading of the PRC's existing manufacturing technology."
Brown said the agreement is "full of caveats" and will require the company and the PRC to work out further details.
On other matters, Brown said a recent Federal Communications Commission decision altering the ways long-distance companies pay operating telephone companies for local hookups is likely to make AT&T's Long Lines operation a "formidable" competitor with cut-rate, long-distance services like those offered by Washington-based MCI Communications Corp.
Brown said AT&T would cut its long-distance rates as soon as possible. "We'll cut them and we'll do it in 1983," he said.
AT&T will keep its long-distance unit, as well as Bell Telephone Laboratories and Western Electric Co., under the terms of its divestiture agreement with the Department of Justice. It will spin off its local telephone companies on Jan. 1, 1984.
Meanwhile, AT&T and its Pacific Telephone subsidiary announced that they had agreed to change the financial structure of Pacific after it is spun off next year.
Pacific officials had complained bitterly that, under terms of the preliminary AT&T decision, its debt ratio and cost of debt were too high for the company to begin independent operation with sound financing. Those complaints, contained in documents filed in January in federal court in Washington, were officially withdrawn yesterday.
The original plan left Pacific with a debt ratio of about 49 percent and an average cost of debt at about 9.7 percent. Under the new plan, those figures will be lowered to less than 47 percent and less than 9 1/2 percent, respectively, AT&T said.