China to hand out 3G licences
February 11,2003
Author: (LI WEITAO)
Chinese authorities are expected in the year's second half to award licences for third-generation (3G) wireless telecommunications to four telecoms carriers.
A "beauty contest" system will be used to allocate 3G mobile phone licences, rather than a lucrative auction, to China Mobile, China Unicom, China Telecom and China Netcom, industry sources told Business Weekly.
Mobile operators in Europe have spent more than US$112 billion buying 3G licences at auctions. Some of those firms, subsequently, have amassed high debts and abandoned network deployment.
3G wireless services enable users to exchange phone calls, video images and Internet data at high speeds over mobile phones.
Still, the timing for awarding licences depends, in part, on test results of China's time division synchronous code division multiple access (TD-SCDMA) technology.
Successful tests will ensure the licences are awarded this year. Otherwise, issuance of the licences could be delayed until next year.
Datang Telecom Technology Co Ltd plans to test TD-SCDMA technology in March or April, said Chen Shanzhi, the company's deputy chief technology officer.
Datang developed the TD-SCDMA technology.
"I expect a licence for a 3G trial network will be issued this year," Chen told Business Weekly.
Authorities may not simultaneously issue licences for the three standards - TD-SCDMA, wideband CDMA (WCDMA) and CDMA2000, Chen predicted.
Unicom reportedly plans to test in April the CDMA2000 technology developed by US-based Qualcomm.
WCDMA is widely backed in Europe and Japan.
The Ministry of Information Industry (MII) had planned to award 3G licences before March, but decided to delay issuance, said Chen Yuping, a research fellow with MII's China Academy of Telecommunications Research.
Analysts note some uncertainties remain.
Unlike other countries, four government bodies - MII, the Ministry of Science and Technology, the powerful State Development Planning Commission and the State Informatization Office under the State Council - have a say about licence-related issues.
MII, however, is expected to become less influential in the telecoms industry, said Wang Yuquan, president of Frost&Sullivan (China), an international consulting firm.
Analysts expect issuance of the 3G licences will affect the performance of China Mobile and Unicom's stocks.
"With both fixed-line and mobile networks, China Telecom and Netcom will gain the upper hand over China Mobile and Unicom," Wang told Business Weekly.
China Telecom and Unicom may offer incentives to users who subscribe to both their fixed-line and mobile services, Wang said.
As deployment of a national 3G network is costly, China Telecom and Netcom may work together to build and manage a national 3G network, Wang said.
"Building only half of the network will hurt both China Telecom and Netcom's abilities to compete with China Mobile and Unicom," Wang said.
In a government-led telecoms restructuring in May, China Telecom, the former monopoly, was split into China Telecom and China Netcom.
China Netcom operates in 10 northern provinces and municipalities, while China Telecom operates in 21 provinces and municipalities in south and northwestern China.
TD-SCDMA will remain an underdog after 3G licences are issued, Wang predicted.
"Telecoms carriers are still sceptical about the home-grown standard, as it lacks competitiveness compared with the two foreign standards," he said.
TD-SCDMA, a relatively young technology, has not been put into commercial use. Industry experts suggest the technology is not mature.
The government might implement some preferential policies to encourage acceptance of TD-SCDMA, but is not likely to force operators to deploy the network, Wang said.
"Operators can choose when to begin network deployment after securing the licences, while telecoms gear makers can decide on which standard to focus," Wang said.
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