Netcom certain to receive Chinese 3G licence

April 12, 2005 - source: BWCS

China's second largest fixed line telecoms operator, China Netcom, is certain that it will "definitely" receive a third generation mobile phone licence when the country's government gets round to handing them out. The company's CEO, Edward Tian, made the claim in an interview with the London Financial Times this morning. According to Tian, there is "no possibility" that Netcom will go empty handed.

Tian claims that the Beijing administration will only issue three next generation licences later this year. He pointed out that awarding Netcom a 3G franchise would almost guarantee the survival of the group in a major shake-up of the Chinese telecoms industry which many observers believe will happen later this year.

As Tian put it "We will get a mobile licence, period. But are we going to get a nationwide licence or provincial licence, what conditions and policies are associated with the licence? The questions are timing and how."

Conflicting reports have emerged from China recently regarding the timing and scope of the expected industry restructuring. The FT report claimed that the government is expected to finalise its plans within the "next two months" and that 3G licences will be awarded by the end of 2005. It also quotes an industry executive as saying that China Netcom may be merged with China Unicom once the latter has disposed of one of its mobile networks to China Telecom.

Netcom itself, which recently raised US$1.13 billion in an initial public offering on Wall Street and in Hong Kong, has refused to be drawn on whether it would merge with any other operator.

Should Mr Tian's prediction prove correct and Netcom does indeed receive a 3G licence, analysts believe it will signal the end of the company's popular unlicensed mobile service, Xiaolingtong - "little smart". The problem then for Netcom will be how to migrate its Xiaolingtong customers to 3G.

User numbers for the urban-based "little smart" service grew very rapidly in 2003 and 2004, often far outstripping the mobile growth rates experienced by the main mobile companies, China Mobile and China United Telecom Corp. The service is a fixed wireless local loop service, closely related to Japan's Personal Handyphone System (PHS), that gives users limited mobility within their home locality.