Thursday July 13, 4:53 am Eastern Time
China steps up research of own mobile standard
By Matt Pottinger
BEIJING, July 13 (Reuters) - China said on Thursday it was stepping up research on a homegrown cellular phone standard that could pose a threat to foreign technologies backed by Nokia Corp (NYSE:NOK - news), Ericsson and Qualcomm Inc (NasdaqNM:QCOM - news).
The technology, called TD-SCDMA, is being developed by government-funded Chinese researchers and Germany's Siemens AG .
The government has already poured tens of millions of dollars into the new standard, designed to replace current-generation mobile phone technology with advanced services, such as high-speed Web access and video conferencing.
While such services appear to be at least two years away in China, the technical standard -- or standards -- which China eventually chooses could have a profound impact on the revenues of foreign mobile firms vying for a piece of the massive market.
Senior telecommunications official Zhou Baoxin told a news conference on Thursday that China was far from determining which next-generation standards it would adopt, but that it was intensifying research on TD-SCDMA.
``As to which standard we will adopt -- and whether we will adopt one standard or two standards -- we are actively studying that right now,'' said Zhou, deputy director of telecoms administration at the Ministry of Information Industry.
``Of course, we're stepping up research on the TD-SCDMA standard which our country has proposed,'' he said.
A THREAT TO FOREIGN FIRMS
TD-SCDMA spells bad news for companies including Finland's Nokia, Sweden's Ericsson, Motorola Inc (NYSE:MOT - news) of the United States, and Alcatel of France. Those companies have patents and manufacturing stakes in a rival standard: W-CDMA.
San Diego-based Qualcomm, on the other hand, stands to gain most from China adopting a third standard, called CDMA2000.
Zhou declined to comment on whether the Chinese government would have the final say on which standards are used, or whether such decisions would be left to the market.
So far, the market has taken an unkind view of TD-SCDMA.
China's two mobile service providers, state giant China Mobile Communications Corp and smaller player China United Telecommunications Corp, have scoffed at the technology as unreliable, according to U.S. analysts who visited China in May.
China Mobile is the parent of China Telecom (Hong Kong) Ltd . China Unicom is the parent of China Unicom Ltd (NYSE:CHU - news), which listed shares on the Hong Kong last month in Asia's largest ever initial public offering outside of Japan.
China Mobile has expressed interest in adopting the W-CDMA standard, since it is compatible with its current-generation GSM networks and would be cheaper to implement.
China Unicom has indicated it would experiment with Qualcomm's CDMA2000 technology.
TIME REMAINS FOR IMPROVEMENTS
An investment banker in Hong Kong who follows the industry agreed that TD-SCDMA had technical flaws, but said there was time left to solve them.
``If you move at a fast speed -- say, when driving a car -- it loses its signal. So there are bugs that need to be worked out,'' said the banker, who declined to be named.
``On the other hand, Siemens backing this does give it some credibility,'' he said.
It is also possible that China will issue licences to new mobile players which could end up using the homegrown standard.
Asked how long it would be before China decides on the standard, Zhou declined to comment.
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