Siemens AG is the latest in a series of vendors to announce new contracts in China, signs that the country continues to stand as a major opportunity for infrastructure makers. Siemens announced two deals with mobile operators for GSM equipment and an order for GSM-Railway network equipment.
Siemens said it inked a network expansion deal for $115.6 million with China Mobile Communications Corp. Ltd., the world’s largest carrier with more than 246 million subscribers. The company also scored a $64.2 million contract for GSM equipment with China United Communications Corp. Ltd., the nation’s second-largest carrier with more than 127 million subscribers.
“3G licenses will soon be awarded in China, which is why we’re all the more pleased about the confidence these two operators have in our technology,” noted Christoph Caselitz, president of Mobile Networks at Siemens. “This cost-efficient expansion will optimally ready the networks of China Mobile and China Unicom for the migration to third-generation wireless and also strengthens our starting position for the award of 3G licenses.”
China’s Ministry of Railways also awarded a contract to Nortel Networks Ltd. to provide GSM-R switching centers for digital mobile signaling and operational communications spanning 20 of China’s 31 provinces and covering nearly half of China’s national railway footprint.
And Nokia Corp. announced that it won a Chinese contract to expand Sichuan Unicom’s GSM footprint in western China by supplying its radio and core networks, including its MSC Server System mobile softswitch in four cities within the Sichuan province. Sichuan Unicom is a subsidiary of China Unicom.
The contracts shed light on China’s apparent commitment to the GSM suite of wireless infrastructure, which some in the industry had questioned since the Chinese government has consistently encouraged the development of TD-SCDMA, a homegrown third-generation technology that promises to become at least part of China’s 3G network buildout.
The infrastructure agreements also underscore vendors’ market positions as they wait anxiously for the Chinese government to award its highly coveted 3G licenses for what is expected to be the world’s largest next-generation network, serving some 400 million Chinese subscribers. But vendors may have to wait until after this year to realize any 3G equipment revenues from Chinese carriers.
Bengt Nordstrom, vice president and chief strategy officer at inCode Wireless, said most industry-watchers are betting that China won’t dole out 3G licenses until the first or second quarter of 2007 due to complications with TD-SCDMA technology.
“TD-SCDMA symbolizes the industrial ambitions of China,” noted Nordstrom. “But I doubt it will be deployed on a large scale anywhere outside of China.”
Nonetheless, Nordstrom added that Chinese carriers likely will want both W-CDMA and TD-SCDMA networks, and though Chinese vendors ZTE Corp. and Huawei Technologies Co. Ltd. have been largely left out of China’s GSM network plans, they will undoubtedly dominate the lion’s share of TD-SCDMA equipment sales.
That said, Siemens isn’t counting itself out of the race to supply either GSM-related or TD-SCDMA technology to Chinese carriers, stating in a press release that its “pioneering role in connection with TD-SCDMA” places the company in a sweet spot, ready to deliver whichever technology the government pushes and carriers deploy.
Nordstrom pointed out that other vendors, such as L.M. Ericsson and Nokia are expected to hold large market shares in China’s 3G buildout, probably along the same percentages they garner in other markets around the globe.
“The 3G infrastructure market is very, very competitive, and price erosion is impacting all the suppliers’ bottom line,” said Nordstrom. “In China, competition between vendors is expected to be extremely competitive. If you’re one of the three top vendors, it’s about maintaining your market position. But for others, if you don’t make it in China, you don’t make it at all.”
