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China's 3G Gets Green Light

Light Reading
News Analysis
Light Reading
1/24/2006
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Having declared that TD-SCDMA is finally ready for primetime, China is planning to build a nationwide network that will run the home-grown 3G standard.

China’s official news agency, Xinhua, reports that the Ministry of Information Industry (MII) has set TD-SCDMA as a national standard and wants a “competent” operator to run a standalone national network.

China has been developing the standard to give the advantage to local vendors in the rollout of 3G and avoid paying royalties to foreign companies that hold the patents for other 3G technologies. But it wasn't clear whether the technology would be deployed on a regional basis or nationwide.

By issuing official specifications for the standard, the Chinese government has opened the way for its long-awaited 3G licenses to be awarded in the next few months. The country’s four main carriers, China Telecom Corp. Ltd. (NYSE: CHA), China Unicom Ltd. (NYSE: CHU), China Mobile Communications Corp. , and China Netcom Corp. Ltd. (NYSE: CN; Hong Kong: 0906), are among those in the running.

China has been holding off its decision on licenses to give the standard time to mature, but it’s running out of time if the country is to get 3G networks up and running to show off at the 2008 Olympics in Beijing as planned. TD-SCDMA suffered numerous teething problems during testing -- from interoperability issues to handset incompatibility. (See Wireless Wumors.)

TD-SCDMA is competing against the wideband-CDMA standard used in Europe and the U.S.-favored CDMA2000, and the Chinese government will likely issue licenses for those as well.

The official go-ahead gave shares in wireless Chinese vendors a boost Monday. For example, Datang Telecom Technology Co. Ltd. , the major developer of TD-SCDMA equipment, was the biggest gainer on the Shanghai Composite Index, closing up 6.54 percent to 8.96 yuan renminbi (US$1.11), while ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) stock rose 3.32 percent to 28.63.

Analysts expect carriers to invest up to $12 billion in 3G once the licenses have been issued, and Western vendors have been positioning themselves to get in on the action. Lucent Technologies Inc. (NYSE: LU) most recently announced a collaboration with Datang for interoperability testing and said it’s exploring further opportunities to get into the market. (See Lucent Finds TD-SCDMA Partner.) Other vendors who have teamed up with their local counterparts include Nokia Corp. (NYSE: NOK), Alcatel (NYSE: ALA; Paris: CGEP:PA), Ericsson AB (Nasdaq: ERIC), and Siemens AG (NYSE: SI; Frankfurt: SIE). (See Nokia Invests in China 3G, Alcatel, Datang Prep TD-SCDMA, Ericsson Bets on Chinese 3G, and Huawei, Siemens Push 3G Deal.)

But that enthusiasm is more to do with vendors sucking up to the Chinese government than any real regard for the future of the technology, reckons Heavy Reading senior analyst Patrick Donegan. “Because of the position the Chinese government is taking, leading Western vendors have to be seen to be showing support for TD-SCDMA. But most of them tend to see it as more of a distraction from global standards than a major opportunity for profitable business.”

— Nicole Willing, Reporter, Light Reading

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