3G delays could hurt China

May 25, 2004

A timetable for the awarding of 3G mobile phone licenses in China has not yet been set said a telecommunications specialist. Deng Shoupeng of the Development Research Center said Beijing would move ahead with "appropriate timing".

China is testing next generation mobile phone technologies during the course of this year, including WCDMA, CDMA2000 and the Chinese backed TD-SCDMA. It is looking increasingly likely the licenses would be issued next year.

The home-grown TD-SCDMA has not been deployed commercially unlike its rivals WCDMA and CDMA2000. If China rolls out 3G services hastily, it will make it a testing field for the immature TD-SCDMA technology. Issuing licenses is therefore expected once the commercial viability of TD-SCDMA is confirmed.

Deng said China would need to spend 500 billion yuan to build out the infrastructure needed for 3G, with a significant of the funds to be spent between 2006 and 2008. (£1 = 14.49 yuan)

The government had wanted to impose conditions on future 3G operators to include TD-SCDMA in their plans but recent reports indicate that China will let individual 3G operators decide their own technology to deploy.

Analysts and industry experts say China cannot afford more delays in issuing 3G licenses and further delays could harm development of the country's telecoms industry.

3G networks take one or two to deploy and by that time, Chinese operators would lag far behind their foreign counterparts said Wang Yuquan, president of consultancy Frost&Sullivan (China).

The telecoms value-added market is worth 10 times more than the equipment market, which is estimated at 1 trillion yuan. Chinese firms may find it hard to compete with foreign rivals in the future value-added market given their relative inexperience, Wang explained.

Others warn further delays will cause China to lag far behind in 3G application development, as consumers are starting to show increased interest in 3G in Europe, Japan and South Korea.

China has the largest number of mobile phone users in the world and is expected to have more than 300 million users by the end of the year.