Foreign Makers Bid for TD Equipment Procurement

March 11, 2007

China Mobile, the largest mobile carrier in the nation, has started the tender for TD- SCDMA system and terminal equipment, and the system equipment manufacturers to participate in the bidding has doubled from the previous four to eight. Foreign companies will also bid for the large order, estimated to hit CNY 26.7 billion, including Ericsson, and Alcatel Shanghai Bell Co., Ltd.

Four Chinese system equipment manufacturers have been confirmed for participation, including Datang Telecom Technology Co., Ltd., Putian, ZTE Corporation and TD Tech Ltd., all of which took part in the TD-SCDMA scale network testing last year. Though Alcatel Shanghai Bell also participated in the testing, it was not confirmed to attend the new round of TD-SCDMA equipment tender. The other three new equipment manufacturers are Ericsson, FiberHome Technologies and Guangzhou-based New Youtong.

Earlier reports said that China Mobile had convened relevant TD equipment manufacturers for a tender consulting conference, and revealed relevant information about the tender to the participants. On March 1, several manufacturers submitted relevant questionnaires to China Mobile to obtain the price information. This means that China Mobile has taken the first step for the tender.

An informed source disclosed that the document by the National Development and Reform Commission (NDRC), the top-level economic planning body in China, showed the investment in the new round of TD network construction will be CNY 26.7 billion, including CNY 23.7 billion for system equipment, and CNY 3 billion for terminals. However, the specific procurement volume of China Mobile still remains unknown, but may vary between CNY 10 billion and CNY 15 billion.

China Mobile's tender for TD equipment consists of two parts, core network equipment and system equipment. Five manufacturers, including Huawei Technologies, ZTE Corporation, Nokia and Ericsson, will bid for core network equipment. Thus, the world's major telecom equipment giants except Motorola and Nortel will all scratch for the big pie.

Industry analysts forecast that new participants will most probably join hands with Datang Telecom Technology Co., Ltd., ZTE Corporation and other Chinese TD manufacturers in the bidding. For example, Ericsson will join forces with ZTE Corporation, while Alcatel Shanghai Bell and FiberHome Technologies will align with Datang. Thus, Datang and ZTE Corporation will take a larger slice of the pie.

Some industry insiders believe foreign participation will conduce to further promotion of TD-SCDMA, the homegrown 3G standard. However, this is very controversial too. Other insiders say that foreign manufacturers are suspected of sharing the gains without previous pains.

Wang Guoping, a securities analyst of Galaxy Securities, points out foreign manufacturers all took the wait-and-see attitude towards China's TD standard last year. Thus, they have chosen to participate in TD just after China Mobile started the multi-billion CNY tender, they tend to be suspected of scratching for the fruit.

Wang Guoping thinks foreign participation will not help the overseas promotion of TD. In fact, foreign manufacturers just want to earn both. They don't want to abandon China's huge TD market, but before TD grows strong, they will not take an active part. After TD is accepted overseas, they will also benefit much from TD's overseas revenues by exchanging their WCDMA and CDMA2000 patents with Chinese companies.