China frees telecom sector by issuing 3G license

In a most significant move made in its telecom sector, China's State Council yesterday approved plans to issue licenses for third-generation mobile phone services, which will result in billions of dollars in investment in developing 3G networks.

With over 600 million mobile users in China, opening up 3G will prove a bonanza for Chinese and foreign telecom equipment suppliers.

Keeping in line with the announcement made early this year of investing up to $41 billion in developing the 3G network infrastucture, the State Council meeting presided by Chinese Premier Wen Jiabao took the decision of issuing licenses to mobile-phone operators for 3G networks.

''Issuing licenses to mobile operators to develop 3G networks plays an important role in boosting domestic demand and optimizing the telecommunications market competition pattern,'' according to a statement issued by the council.

The 3G networks will use three technological standards, Europe's WCDMA, North America's CDMA 2000 and the locally developed TD-SCDMA (time division synchronous code division multiple access).

The Chinese government had delayed issuing this licence as it wanted its locally developed TD-SCDMA technology to be fine-tuned although many experts believe that the technology originally belonged to the German company, Siemens, which had given the failed technology to the Chinese who in turn rebranded it as their own home-developed technology.

This will allow Chinese telecommunications companies save on royalties and patent use for acquiring foreign technology.

The top three telecom giants in China expected to receive 3G licenses on the New Year day. China Mobile will be using TD-SCDMA technology, China Unicom will use W-CDMA and China Telecom will use CDMA2000 and the issuing of 3G licences will not only open the doors for massive jump in investment but also spur fierce competition for customers between the three telecom giants.

With 3G networks being able to handle data downloads faster as it allows cell phone users to make video calls and watch TV programmes, the mobile handset suppliers hope to reap a bonanza in the world's largest wireless market.

China Mobile, which happens to be the world's largest network operator, has said that it will offer 3G handsets from Nokia on its TD-SCDMA network and that it had placed orders worth $4 billion to equipment suppliers to build the second phase of its 3G network.

Motorola has been awarded the contract to upgrade China Telecom's CDMA infrastructure while Alcatel-Lucent was awarded a $230-million contract from China Telecom last year. Motorola and Alcatel-Lucent are recent entrants to have bagged some orders in China.

Chinese mobile companies will invest $41 billion on the 3G networks and services in the next two years with the government expecting investment in 3G and other telecommunications services to reach approx $320 billion annually in a few years.

Many reports have suggested that, the largest Chinese carrier, China Mobile will have nearly 100 million 3G subscribers in the next three years, which is more than the country's entire mobile market.

The government had in July said that the 3G licenses would be issued after six months as it wanted the restructuring of the telecommunications sector where it wanted the six surviving telecom operators to merge into three to spur competition.