3G licenses finally on track for China: Move part of major telecom restructuring

There likely won’t be any 3G service at this summer’s Olympic Games in Beijing, but the host country is finally making progress on a years-long plan to issue licenses that will enable carriers to begin deploying third-generation networks, the government said over the weekend.
After years of delays and false starts, the world’s largest and fastest-growing cellphone market appears ready to creep ahead on wireless network upgrade plans.
Speculation has run rampant through most of this decade. Some industry watchers anticipated 3G licenses would be handed out in late 2003. And, again, many thought they’d turned the corner in late 2006.
But even after all this time, it won’t come easy – nothing short of a complete restructuring of the country’s telecommunications sector will have to be finished first.
Before the government issues 3G licenses, it’s overtly requiring mergers, acquisitions and other moves that will leave the country with three large telecommunications companies.
China Mobile, the world’s largest carrier by subscriber numbers with nearly 400 million total customers, will merge with China TieTong Telecommunications Corp. China Telecommunications Corp. will have to acquire China Unicom Ltd.’s CDMA business and Unicom’s GSM assets will be merged with China Netcom Corp. Ltd. China Mobile stock was down 7.5% on the news.
Each of the three remaining companies, which will own fixed line and mobile assets, will get a 3G license from the government. Currently, fixed-line operators are not allowed to offer mobile services and mobile operators can’t sell fixed-line services.
China is a gold-mine for the world’s network equipment suppliers and with this latest step toward a 3G future, infrastructure vendors will be vying for every contract they can eke out. Some reports put China Mobile’s 3G buildout at $75 billion. All of the major vendors have maintained business relationships in the country as they anticipated the 3G push.
Alcatel-Lucent announced a pair of 3G trials last May with China Mobile and China Unicom valued at $460 million combined.
While it may be the world’s largest mobile market, China will also be among the last to rollout 3G services.
The Chinese government is also asking the operators to favor TD-SCDMA, a home-grown 3G standard that’s been tested in the country, but it’s unclear if it will be a mandated standard for all. More than a year ago China Mobile tapped a pair of vendors to trial the technology.
Early this year, ABI Research said it expects TD-SCDMA licenses to be issued by the end of the first quarter with the remaining 3G licenses to be released six to nine months later.
The Chinese government did not say how long it expected the restructuring process to take, but some reports pin the time line at 12 to 18 months.