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March 20, 2007
China Mobile Communications Corp. launched the tender process for its Rmb24 billion (US$3.1 billion) TD-SCDMA network. While Chinese vendors are expected to take the lion's share of the contracts, foreign vendors won't lose out.
The world's largest operator by number of subscribers is forging ahead with China's homegrown TD-SCDMA technology even before it has secured a license. (See 3G Nears Reality in China and Chinese Roulette.)
China Mobile is seeking bids for contracts reportedly worth $3.1 billion in total, of which $2.6 billion will be for network equipment and $500 million for TD-SCDMA handsets.
China Mobile wants eight vendors for its national TD-SCDMA network: four each for the radio access and core networks.
According to BDA China Ltd. , the consultancy service, the key vendors that China Mobile is evaluating for radio access are Datang Mobile Communications Equipment Co. Ltd. , ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763), China Putian , and TD Tech Ltd.
In the core network, the main vendors are Alcatel Shanghai Bell Co. Ltd. , Ericsson AB (Nasdaq: ERIC), Nokia Corp. (NYSE: NOK) and ZTE, according to BDA China. Ericsson and Nokia could not confirm that they were bidding as this article was published.
About 70 to 80 percent of the network cost will be in radio access equipment, which means there is about $2.1 billion worth of business to be had. And this will mostly go to Chinese companies, says Meiqin Fang, principal analyst at BDA China. "The Chinese government may have some preference toward some specific vendors," she says. "It is possible."
"Chinese vendors will be the main beneficiaries," says Patrick Donegan, senior analyst at Heavy Reading. "From the perspective of foreign equipment vendors, TD-SCDMA is an unwelcome distraction from global standards but one which they dare not ignore, because refusing to participate in the TD-SCDMA market in some way would put at risk their positioning for W-CDMA equipment contracts."
But foreign suppliers won't completely lose out. Each of the four Chinese companies that China Mobile is considering has a foreign partner. TD Tech is a $100 million partnership between Siemens AG (NYSE: SI; Frankfurt: SIE) and Huawei Technologies Co. Ltd. Nokia has a 49 percent share of the $111 million joint venture with China Putian. Ericsson has partnered with ZTE. And Alcatel Shanghai Bell has partnered with Datang. (See Huawei, Siemens Push 3G Deal, Nokia Invests in China 3G, Ericsson Bets on Chinese 3G, Ericsson Teams With ZTE, and Alcatel, Datang Get Closer.)
When the Nokia Networks joint venture begins operations on April 1, a company spokeswoman confirms, all of Nokia's and Siemens's existing agreements will be transferred into the new company. (See Nokia Siemens Targets 4/1.)
In the TD-SCDMA core network, BDA's Fang believes that China Mobile will rely on vendor experience.
"Ericsson, Nokia, and Alcatel Shanghai Bell have already deployed core networks in overseas markets… I don't think China Mobile will have a strong preference toward domestic vendors," says Fang.
The network deployment is still considered pre-commercial because China Mobile does not have a 3G license yet. But the government appears eager to get TD-SCDMA deployed in time for the Beijing Olympics in 2008 and give it a fighting chance before granting 3G licenses.
"The government wants to let TD-SCDMA have a headstart before other 3G technologies emerge in the market," Fang observes.
But the network will be hindered by inferior handsets. There are only about 20 different models available now.
"The variety, price and performance of TD-SCDMA handsets still has a long way to go compared to WCDMA handsets," says Fang.
— Michelle Donegan, European Editor, Light Reading
Michelle Donegan is an independent technology writer who has covered the communications industry for the last 20 years on both sides of the Pond. Her career began in Chicago in 1993 when Telephony magazine launched an international title, aptly named Global Telephony. Since then, she has upped sticks (as they say) to the UK and has written for various publications including Communications Week International, Total Telecom and, most recently, Light Reading.
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