chinese3g.jpgWhat better way to start the new year than with some news on the long-overdue launch of 3G mobile telecoms in China? Well, don't hold your breath.

You might think that all that could be said on this issue had been said last month at Telecom World in HK — see this earlier story. And you'd be right, at least if you pick up the Financial Times which has published an unusually weak story ($) on China's 3G saga that adds nothing new to what was known a month ago. I guess it must have been a slow news day.

For those who haven't been following this potboiler, western and Chinese equipment manufacturers are anxious to get a share of the windfall when China finally awards new licences for 3G networks. For the last couple of years, telecom operators in China have not embarked on any large scale network expansion projects, to the dismay of equipment makers. The government's chronic delay in awarding 3G licences has made the equipment giants even more anxious.

It is estimated that around 100bn yuan would be spent in the first phase of building a 3G network based on China's home-grown standard, TD-SCDMA.

Equipment makers are the biggest short-term beneficiaries but handset manufacturers and operators would also benefit from the pent-up demand for higher-priced 3G handsets and new 3G services such as videocalling or high-speed internet access. More on the winners and losers in this Xinhua story.

The government, while keen to promote TD-SCDMA, is mindful of the delays and teething problems that have dogged its development and worries they could jeopardise its ambition to have commercial 3G services up and running in time for the 2008 Olympics.

For that reason, it may play safe and award licences that require the use of TD-SCDMA but also let one or more operators use the tried-and-tested 3G variants, CDMA2000 and WCDMA, which are widely used in the rest of the world. Building a network based on one of these existing standards would not only be much less risky but also cheaper at around 75bn yuan.

Industry insiders and analysts have been trying to call a government decision on the subject of licences for more than three years, but time is now running out.

For their part, China's network operators are keen to get new revenue-generating 3G services on line as soon as possible and have few qualms about using western technology. Dai Zhong, deputy general manager of China Mobile's networks department tells the FT that “WCDMA is better for China Mobile”.

But as with many areas of technology policy, China's government sees 3G as a “strategic” technology and so is keen to promote its home-grown TD-SCDMA standard, not least because that means that Chinese operators would not have use technologies that have to be licenced from western companies.

Telecoms policy is complex and is contested between different arms of the government, which probably explains why three years after this standards battle first erupted, official utterances on the subject of 3G licences remain clouded in “inscrutable ambiguity”, according to the FT.

A government announcement is likely early in 2007, says the 'paper.

More on the winners and losers in China's 3G industry in this Xinhua story.

Elsewhere on the 3G front:

  • Three quarters of Chinese mobile users are keen to buy a 3G phone when they become available, according to a survey by the China Centre for Information Industry Development (CCID), reported by Xinhua. Around 17% say they “might” buy a 3G phone and only 6% say they will definitely not own one. Handset price is likely to be a critical factor in 3G popularity, as around 25% of users will opt for low-end mobile phones costing less than 1,000 yuan and less than a quarter are prepared to spend more than 2,500 yuan.

  • The heavy investment needed to fund 3G networks is likely to see China's operators tap China's domestic equities market through A share listings. China Mobile, the largest, is currently listed in HK and a domestic IPO has been on the cards for some time — see this EngagingChina story.

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