Chinese telecoms equipment maker Potevio and Finland-based Nokia have secured preliminary approval from regulators to establish a joint venture to develop 3G (third generation) mobile communications technology.

The National Development and Reform Commission (NDRC) said on its website that it has approved a joint venture between the two firms with an investment of 900 million yuan (US$112 million).

Potevio, formally known as China Putian Corp, will have a 51 per cent stake, with Nokia owning 49 per cent.

The joint venture will mainly manufacture and market telecoms equipment such as base stations, based on the 3G standards TD-SCDMA and WCDMA.

TD-SCDMA is a home-grown Chinese standard, while WCDMA is a widely adopted global standard.

"We are still waiting for approval from the Ministry of Commerce (MOFCOM)," said Tao Xiongqiang, vice-president of Potevio, in a telephone interview yesterday.

With the final green light from the MOFCOM, the joint venture will begin building a plant in Wuhan, capital of Central China's Hubei Province.

"We hope the plant will be operational before the end of this year," said Tao, who is also the chairman of the joint venture.

Potevio and Nokia said they would establish the joint venture last October. Under the deal, all products will use the Potevio brand, owned by Putian.

In 2004, Potevio and Canadian communications giant Nortel Networks signed a memorandum of understanding for a similar joint venture.

But the planned venture was later dissolved, with Nokia replacing Nortel.

Prior to Nokia, Alcatel, Siemens and Ericsson have also set up joint ventures and strategic alliances with local firms to develop TD-SCDMA.

TD-SCDMA remains an unproven technology as it is not yet in commercial use.

Tang Ruan, president of Datang Mobile, the major developer of TD-SCDMA, said increasing interest from foreign giants will help speed up the commercial deployment of the Chinese technology.

And "now some overseas cellular operators are also showing interest in TD-SCDMA," he told China Daily.

France Telecom in May joined an industry alliance promoting TD-SCDMA technology as the first overseas operator.

Currently, China Telecom, China Mobile and China Netcom, three of China's top four telephone carriers, are testing TD-SCDMA in three cities.

So far, the ongoing trials have been "basically smooth," Tao said.

It is widely anticipated that Chinese regulators will not award operators with 3G licences until the TD-SCDMA trials are completed.

With strong support from the Chinese Government, TD-SCDMA is expected to take a large share of the future 3G market  as much as one-third, according to some industry executives and analysts.

The build-out of 3G networks in the country is expected to cost hundreds of billions of US dollars.

(For more biz stories, please visit Industry Updates)