The Chinese government has approved plans to issue licenses for 3G-based wireless services, a decision that will result in billions of dollars spent there on infrastructure during the next two years. The move stands as a massive opportunity for network and handset vendors hoping to cash in on the world’s largest wireless market.

The State Council, China’s cabinet, announced today that it has agreed to start issuing licenses to mobile-phone operators for 3G networks. The decision was made during an executive meeting and then announced on the government’s Web site.

Earlier this year, China announced it would invest $41 billion to develop 3G networks.

“Issuing licenses to mobile operators to develop 3G networks plays an important role in boosting domestic demand and optimizing the telecommunications market competition pattern,” according to a statement issued by the council.

Three technological standards will be used for the 3G networks, including Chinese-developed TD-SCDMA, Europe’s W-CDMA and North America’s CDMA2000.

According to the council, it views TD-SCDMA as a “landmark of Chinese innovation” and the country will continue to support the development, deployment and industrialization of the technology.

Chinese officials have said that efforts will be made to enhance the industrialization of core chips, terminals and test equipment for its home-grown TD-SCDMA standard.

Dividing the technologies

The top three telecom giants in China are expected to receive 3G licenses at the beginning of 2009. China Mobile will use TD-SCDMA, China Unicom will use W-CDMA and China Telecom will use CDMA2000.

With the announcement, Tang Mingjun, a telecom analyst with Shenyin Wanguo Securities in Shanghai told Reuters that Chinese companies awarded the contract will have different responses from the market.

“China Unicom and China Telecom will see a positive reaction in terms of share price reaction,” Mingjun told Reuters. “China Mobile’s shares may lag behind.”

According to published reports, China Mobile has spent billions of dollars on developing TD-SCDMA. ZTE Corp. and Datang Telecom Technology Co. are supporters of the technology.

“For equipment manufacturers, such as ZTE, investing in a new network will surely speed up its business,” Liu Jun, an analyst with Ping An Securities in Shenzhen, told Reuters in an interview.

China Mobile, the world’s largest network operator, has said that it will offer 3G handsets from Nokia Corp. on its TD-SCDMA network.

Motorola Inc. and Alcatel-Lucent have recently secured work in China. Motorola has been selected to upgrade China Telecom’s CDMA infrastructure. Alcatel-Lucent announced last year that it was awarded a $230 million contract from China Telecom.

The Chinese government is moving to 3G technology because such networks handle faster data downloads, allowing mobile users to make video calls and watch television programs.

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1. Robert Duncan
   January 1, 2009 06:01 am

   The clear winner here is W-CDMA (3G+ GSM), and I find it odd that the Chinese regulatory body even bothers to place a bet on CDMA, which is dead (no evolution plan beyond that which is deployed today, CDMA2000 Rev A).Better understood, if predictably parochial, is China's attempt to force the development of its own technology, by granting a license to deploy TD-SCDMA (China Mobile will use TD-SCDMA). This is quite probably also a loser (as confirmed by the telecom analyst's comments in the article, noting that China Mobile's shares will relatively suffer) , but the Chinese have pushed their home-grown technology this far (that they perceive as a “landmark of Chinese innovation”), and so they are compelled to give it a shot in the market, as it could succeed and reap significant gains for their home companies that have developed it so far.While it's good for the industry to have the Chinese 3G deployments moving ahead on fairly even ground, it seems a shame that the Chinese forced the investment in specific technologies of CDMA and TD-SCDMA. A better, market-driven approach would be to allow the 3G licensees to use the technology of their choice, but that is not the Chinese way (at present).Robertimcelular.org

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