Most people agree China offers a lucrative wireless landscape. It is already the world’s largest market with one of the lowest mobile penetration rates. The opportunities for vendors and operators alike are enormous.
China has its drawbacks as well. Doing business in China is different than in most other countries. Communication is limited, decisions are not always concrete, double standards abound and uncertainty tends to be the common element for many players.
For example, several years ago the Chinese government went back and forth on its decision of whether to allow CDMA technology into the country. It was like watching a tennis match. First CDMA had the go-ahead, then it was strictly banned and then it was on again. The country now finally has a CDMA network.
And to highlight the issue of double standards, the government has licensed only two mobile operators-China Mobile and China Unicom. However, the country’s fixed-line operators are offering wireless services, albeit not cellular services. China Netcom and China Telecom offer a limited mobility service based on technology from UTStarcom, one of the only companies faring well during the wireless industry downturn. Although the government has banned these services, they’re still available, inexpensive and generally sufficient for the wireless needs of most Chinese people.
So the country’s entire third-generation licensing process and ensuing market battle will be interesting to watch. So far, Beijing hasn’t said how many 3G licenses it will make available. Most industry watchers are guessing up to four, mostly because the government is keen to add new mobile licensees.
The government also has not said which 3G technologies will be allowed. In addition to the tiresome W-CDMA vs. CDMA2000 battle, China has its own 3G technology-TD-SCDMA. Several Chinese companies, in addition to Siemens, have a vested interest in seeing TD-SCDMA allowed in the country. Most industry watchers think it will be allowed because Beijing generally takes care of Chinese companies. Main TD-SCDMA developer Datang is partially owned by the government.
Will China be the first market with three competing 3G technologies? Or will one of the big two be excluded? Not even the companies and associations that have been lobbying the government for months on 3G licensing know the answers. As if to cover all its bases, this week Siemens announced it will invest an additional $30 million in China for W-CDMA gear.
Most market watchers predict Beijing will make its 3G decisions by year-end, and with the recent flurry of lobbying under way, that’s probably likely.
Once the 3G details are ironed out, China’s handset market will also become more competitive. Nokia and Motorola are already losing market share to local Chinese handset vendors.
In short, industry’s big players have a lot to gain as the Chinese market matures. They also have a lot to lose, because the Chinese government has never been predictable.
