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.