3G pace in China accelerates, Mobile finishes gear deals
China is starting another goal that has been cherished for a long time, which is operating high-speed telecom services. China Mobile has dished out over $4 billion of deals and smaller rival Unicom is hoped to win a 3G license soon.
But analysts continued to warn that in such a worsening economy, carriers and investors should not expect quick returns with consumers after investing billions of dollars.
The world’s largest mobile provider, China Mobile, is now planning to acquire dual-band cellphones with Motorola and Sony-Ericsson. This kind of cellphones is expected to be used on China’s homegrown third-generation wireless standard, known as TD-SCDMA.
According to the Chairman Wang Jianzhou last week, the firm had finished tenders for building the second step of that network. It is reported the sealing deals worth 30 billion yuan. That will give the firm strength to start the construction of a network that is expected to begin in mid 2009 immediately.
Wang told Reuters in a brief of an Asian wireless telecommunications conference that there is one problem with TD-SCDMA, which is the available handsets are not superior in quality. Customers in trial had complained about dropped lines, a problem with handsets rather than the network.
But revenue from 3G applications and content such as multimedia, music and games will not come in time to offset a sharp deceleration in consumer spending. China Mobile last month posted a 26-percent jump in third-quarter net profit but disappointed investors with a sharp drop in growth.
In order to balance the slowdown in revenue growth, they are going to speed up the pace of the investment in rural markets, Wang said.
The second step of China’s Mobile’s 3G expansion plan is to expand services more than 28 cities, cover 38 cities next year, Wang added. But the competition is coming on fast.
Chairman Chang Xiaobing said last week that China Unicom, the smaller mobile operators is expecting Beijing to accelerate the issue of 3G licences.
Meanwhile, the ongoing project may influence the two-thirds share of users China Mobile owns now. And the market is not yet big enough to justify full commercial operations, said Marvin Lo, telecom analyst for Daiwa Securities.
“With economic conditions deteriorating… very likely consumers will tighten their spending,” he said.
Wang refused to reveal the details about the tenders.
Based on the report of the South China Morning Post, China’s second telecommunications equipment vendor ZTE Corp had won about 28% of the 30 billion yuan in orders from China Mobile. ZTE executives neither confirm nor deny that.
Other winners in the tender may include Datang Mobile, the patent and holder of the TDSCDMA technology, together with Alcatel Shanghai, Huawei Technologies and Siemens Networks, the newspaper said.
Shares of ZTE slid as much as 6.4 percent, while China Mobile dived 3.8 percent–narrowly outperforming the benchmark Hang Seng Index’s 4.5 percent fall.
China Mobile said last Tuesday that it will sign a contract with Nokia for the finnish firm to supply dual-band handsets next year compatible with both GSM and TD-SCDMA networks.
The company was also talking about supplying dual-band handsets with Motorola and Sony-Ericsson, said Wang.
Chairman of Unicom Chang Xiaobing hoped to get a 3G licence by the end of this year. Unicom plans to supply services occupy 50% of the revenue in future, Chang said, but for that target, there was no timeframe.
Lo suspected that the licence may not be issued by the time China Unicom is hoping for. The government will put a higher priority on the development of TD-scdma first before any 3G licence could be issued.
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