New Chinese Competition Could Boost CDMA
By Mike Newlands
The restructuring of China's communications ministries
seems set to intensify competition between the country's
three telecoms, and open a new opportunity for the CDMA
mobile standard in a market that has so far been dominated
by GSM.
China's whole communications sector was rebuilt last month
as part of wider government shake-up which saw a
wholesale cull of the country's legion of civil servants. In the
communications sector the old Ministry of Posts and
Telecommunications was merged with the former Ministry of
Electronics, to create a new super ministry with
responsibility for activities ranging from the fixed wire
networks to broadcasting.
Before the restructuring China's early attempts at telecoms
competition had been stymied by inter-ministry rivalry. China
Telecom had enough access to the regulatory and
administrative levers of power at its parent, the Ministry of
Posts and Telecoms (MPT), to be able to frustrate the
growth of the fledgling China Unicom, while at the same time
delaying the launch of the CDMA system as its GSM
network became entrenched nationwide.
Now that Unicom's parent, the Ministry of Electronics
Industry, has merged with MPT to create the new Ministry of
Information Industry, market forces are expected to be given
more freedom to dictate how the industry grows. The theory
is that Telecom and Unicom will get on with being telecoms
operators while the Ministry ensures a level playing field for
them to compete on.
A question mark hangs over China's the third operator, Great
Wall, a joint venture between Cesec, which was until very
recently the commercial arm of the People's Liberation Army
(PLA), and the now defunct MPT.
Part of the recent government restructuring involved getting
the armed forces out of business and back to the barracks.
Initially it was thought this only meant combat units, but last
week the Central Military Commission stated that the ban on
taking part in business activities extended to non-combat
units as well.
Where this leaves Great Wall is unclear, but the likelihood is
that it will continue as a third mobile phone network under
civilian management and in competition with Telecom and
Unicom.
However, whereas Telecom and Unicom have been
developing substantial GSM networks while running limited
trials with CDMA, Great Wall has pinned its hopes on
building a national CDMA network, not least because the
army controls the radio spectrum CDMA uses.
Indications are that it will get its way, despite the removal of
the army from the equation, and that its trial network in
Beijing could be converted into a full commercial operation
within a month. The Motorola-built system can support
45,000 subscribers, but it is expected to grow to 540,000 by
the end of 2000.
Shanghai would be the next approval given, around August,
with the Samsung-built network now at a capacity of about
60,000 subscribers. A Samsung executive told a Chinese
newspaper the network will be upgraded to a 200,000
capacity by year's end and is expected to attract between
three million and five million subscribers within three years.
Commercial trials of CDMA have been running in Shanghai,
Beijing, Guangzhou and Xian since early last year, and the
other two cities will be able to go onto a commercial footing
soon after Shanghai.
China Unicom has also begun the construction of CDMA
networks in Tianjin, Shanghai and Guangzhou, and now
hopes to get approval for commercial trials by midsummer,
with its Tianjin network possibly launching commercially as
early as the end of the year.
Late last month the international CDMA Development Group
(CDG) hosted a highly successful 1998 China CDMA
International Summit in Beijing, which attracted more than
1,000 delegates. Chinese officials at the conference were full
of praise for CDMA technology, including Chang Xiaobing,
deputy director general of China Telecom, who delivered the
opening address and He Fuqi, director general for the Office
of the State Radio Regulatory Commission. This gives
another clear signal that the green light has been given at
the highest level for CDMA to go ahead on a commercial
basis.
In the meantime, Telecom and Unicom have been forging
ahead with the development of GSM. Telecom, through
various provincial authorities, has already awarded more than
US$1 billion-worth of contracts for GSM network expansion
so far this year:
Nokia has won contracts in Henan Province ($130 million)
and NingXia Hui Autonomous Region.
Ericsson has won a massive $369 million contract in
Guangdong Province, although this also includes some
analogue network expansion, as well as contacts in Jiangsu
Province ($182 million) and Hebei Province ($58 million).
Siemens has won contracts in Anhui Province and
Shanghai Municipality jointly worth $197 million.
Motorola has won contracts in Tianjin Municipality ($43
million), Jiangsu Province ($42 million) and Hubei Province
($38 million).
Northern Telecom was awarded a $27 million contract for
Zhejiang Province.
Up to $3 billion more of GSM network development and
expansion work is expected to be contracted out by China
Telecom alone this year.
Meanwhile China Unicom is pressing ahead with the
development of its GSM network covering major cities in the
in the Yangtze River Delta, the Pearl River Delta and the
Bohai Sea Ring.
New World Telecom from Hong Kong is investing $40 million
to set up a joint venture network with Unicom for 170,000
subscribers in Jiangxi Province. Unicom expects to add
more than 750,000 new GSM subscribers in 1998, to give it
a total of more than a million.
At the end of 1997 China had 13.5 million mobile phone
subscribers. This number is expected to grow to 18 million
by the end of this year and 30 million by 2001. The question
is not whether this is attainable, but how the new business
will breakdown between the three operators and two digital
systems in the much freer market environment that is being
created.
regards
bruce |
