China's telecommunications firms including China Netcom and China Unicom are seeking capital to prepare for the next generation mobile phone technology.

China Netcom, the country's second biggest fixed-line phone operator, will start a 10 billion (US$1.25 billion) short-term bill tomorrow.

"It will give us adequate capital and the one-year bill helps us reduce the costs of raising money," China Netcom said in a statement.

Short-term bills usually have a lower interest rate than a bank loan, industry insiders said.

Telecommunications analysts said China Netcom's move showed its ambition to raise enough money to build a 3G network.

Meanwhile, China Unicom launched a 6 billion yuan short-term bill at the beginning of this month.

The central government is expected to issue 3G licenses in the fourth quarter or the first half of next year.

Construction of a national 3G network will cost about 100 billion yuan. Most telcoms, except China Mobile and China Telecom, are not able to establish a network. Therefore, they have to cut costs and raise more money, according to Norson Telecom Consulting, a Beijing-based information technology consulting firm.

Before that, China Netcom sold its stake in Asia Netcom for US$350 million. The company, which holds a 20 percent stake in PCCW, also showed no interest in acquiring more PCCW shares when they were offered recently.

China is expected to issue 3G licenses to three of the four major telecom firms - China Mobile, China Unicom, China Telecom and China Netcom.

"Competition will further escalate if more mobile licenses are awarded, thus leading to possible changes in the market share and the financial profiles of the existing operators," research firm Fitch Ratings said in a recent report.

Chinese telecom carriers need to invest at least 36.6 billion yuan during the initial stage of 3G, according to Norson Telecom.

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