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 late last month.
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.
“I’m not holding my breath on any of this. Five or six years ago we were all saying ‘ooh, 3G licensing in China is coming any day now,’ so I’ll be happy to see it when it happens and maybe Hillary Clinton would drop out of the election on that same day,” said Peter Jarich, principal analyst on wireless infrastructure at Current Analysis. “Who knows, bigger events have happened.”
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Changes first 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 Telecom Corp. China Telecom 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. And just who will benefit most from 3G finally coming to China? “Like any good technology event, the citizens of China are the first and foremost to benefit from it,” Jarich said. “There is going to be demand for data applications, there is going to be demand from the people for 3G data services.”
Vendors ready China is a goldmine for the world’s network equipment suppliers as well, 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 alone. “There are a ton of vendors out there that are salivating at the opportunity. It’s going to be an interesting chance to see how on a maybe not-so-level playing field you will see the competition play out between the folks that have really been doing 3G for a while and 3G newcomers like Huawei and ZTE,” Jarich said. 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. “It’s always good to have that presence and all the major vendors have a decent presence in China so it’s not like anyone’s ignored it, but clearly if you got a corporate headquarters there, you do have a bit of a home field advantage,” Jarich said. Local flair While some have suggested China’s been putting off 3G services to give TD-SCDMA, a home-grown 3G standard, opportunity to grow and evolve, it’s equally likely that ZTE Corp. and Huawei were given a chance to catch up and compete more directly with other infrastructure vendors, Jarich suggested. “Five years ago if China had allocated 3G licenses and remarkably ZTE or Huawei had gotten a chunk of the deals, people would go ‘wow, that’s favoritism,’” he said. “2008, it would make more sense. You know, you could get away if Huawei or ZTE won a major chunk of those 3G deals. People are now in a position to say ‘ok, it makes sense, it’s not just because they are the home team.’” While it may be the world’s largest mobile market, China will also be among the last to roll out 3G services. The Chinese government is asking the operators to favor TD-SCDMA, 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. “I think it is up in the air. It seems fairly clear some will probably be made to do TD-SCDMA. On the other hand, some of the reports seem to say it’s not performing well; that even given the head start in China and even given all of the extra support that it’s been given, it’s not up to snuff,” Jarich said. 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. |
