Foreign companies may lose out in nation's 3G launch

The world's largest telecom equipment makers are striving to get a bigger slice of the billions of dollars China will invest in its third-generation (3G) mobile network.

But foreign companies may struggle to benefit from China's 3G spending, as analysts predict domestic companies will get the lion's share of the country's 3G investment.

According to Beijing-based research firm BDA China, Ericsson, Alcatel-Lucent and Nokia Siemens Networks' total shares in China's upcoming telecom investments are together expected to amount to less than 50 percent.

Domestic equipment suppliers such as Huawei Technology and ZTE Corp will get most of the new spending.

The dominating position foreign vendors gained in China's telecom network market in its 2G era, during which companies such as Ericson and Motorola took over 90 percent of the market, may be reversed.

Domestic vendors' aggressive pricing as well as their support for the homegrown 3G mobile telecommunications standard TD-SCDMA could be decisive factors against foreign competitors.

China is the world's largest telecom market in terms of subscribers and its 3G licensing has long been postponed due to the government's support for TD-SCDMA.

Li Yizhong, minister of industry and information technology, said at an industry conference in December that China will spend 280 billion yuan, or about $40 billion, on 3G networks over the next two years, stimulating China's economy and helping fend off the financial crisis.

He also said the government will strongly support the TD-SCDMA standard. Few international telecom companies have adapted products for TD-SCSMA.

Although many foreign companies will find it difficult to benefit in China's 3G era, they may prove better suited to providing the technologies that Chinese carriers will use.

Alcatel-Lucent could get a 20 percent share of China Telecom's investment and a healthy share of China Unicom's, according to analysts at telecom consultancy BDA.

US chipmaker Qualcomm signed a licensing partnership in December with China's largest domestic mobile phone maker Beijing Tianyu Communications Equipment to make 3G mobile phones and will probably ride China's 3G market boom.

China Mobile has 443 million subscribers, China Unicom had 132 million users and China Telecom had 28.4 million users, as of October, according to figures from the Ministry of Industry and Information Technology.

(China Daily 01/05/2009 page5)