Friday, February 16, 2007

China 3G license report

ANALYSIS-China 3G: seeming delay masks network rollout 16 Feb 2007 14:20

By Sophie Taylor and Judy Hua

SHANGHAI/HONG KONG, Feb 16 (Reuters) - The latest setback on China's rocky road to issuing third-generation wireless permits isn't all it seems -- rather than pushing back the launch, Beijing is giving local players such as ZTE Corp. <0763.HK> a headstart, and kickstarting a network rollout.

After years of delay and with a potential $10 billion of network gear orders in the balance, Beijing is extending pre-commercial testing of a homegrown TD-SCDMA (Time Division Synchronous Code Division Multiple Access) standard to 10 cities from the original five.

But analysts say that trial extension is in effect a soft launch or rollout that favours local gearmakers -- who have more of an edge in TD-SCDMA versus foreign makers more focused on better-established W-CDMA and CDMA2000.

Consider: the parent of top global wireless carrier China Mobile Ltd. <0941.HK> is on the verge of awarding 18 billion yuan ($2.3 billion) in contracts to build and support TD-SCDMA networks for that fresh round of trials, several state newspapers reported last week.

China's largest listed telecoms gearmaker, ZTE <000063.SZ>, is expected to win nearly a third of contracts slated for gear makers, worth about 10 billion yuan, local media and analysts say.

Other gearmakers likely to get TD-SCDMA contracts are Alcatel-Lucent , Nokia -- through ventures or alliances -- and a sprinkling of local players.

"This is a compromise proposal -- it means the 3G delay this time is not a delay in building TD-SCDMA networks, but just a delay in issuing licences," said Steven Liu, a Hong Kong-based analyst at DBS Vickers Securities.

Global players such as Siemens , Nokia, Motorola , Ericsson and Nortel Networks have jumped on TD-SCDMA -- which will provide rapid Web and multimedia services -- since it was conceived in 1998.

But most may be forced to take a back seat when network contracts are handed out ahead of the 2008 Beijing Olympics.

"Should the government issue the licence at the end of 2007 or early 2008, time will be very limited for building the W-CDMA and CDMA 2000 networks," said Vincent Dong, Beijing-based analyst at Norson Telecom Consulting.

"Foreign vendors can only benefit a little from the TD-SCDMA rollout from their joint ventures in China ... but it is too little to offset a loss in W-CDMA and CDMA2000 networks," said DBS' Liu. "Foreign vendors might be the loser."


The official launch of 3G licenses looks increasingly distant, with Ericsson Chief Executive Carl-Henric Svanberg the first top industry executive to all but dismiss the chance of a 2007 rollout earlier this month.

But several executives who work closely with the four major telecoms companies still expect licences this year.

"It always happens here that before they do anything, that's always when people are saying, 'it's not going to happen'," said one, who spoke on condition of anonymity.

China, keen to build up national technological standards but wary of face-losing hiccups, is walking a middle road between further delays in its TD-SCDMA rollout, and staying cautious.

The extended 3G trial, which authorities say is necessary to ensure a smooth start-up of the data-rich standard, will start in March and may last until the end of October. BNP Paribas analyst Marvin Lo wrote on Wednesday that China Mobile would step in to lead and kick off the TD-SCDMA effort.

That would sideline other operators and give China Mobile time to consolidate its dominance of the world's largest telecoms arena.

"The TD-SCDMA trial will be run in an almost commercial way but there will be no licences for this trial, and this way the Chinese government gives the TD-SCDMA more wriggle room to expand," said Florian Pihs, Beijing-based assistant vice president at Analysys International.

Still, China Netcom <0906.HK> has said the issue of TD-SCDMA licenses would not necessarily have to wait until trials were completed in October, and that licenses for the three standards could come out simultaneously, according to research reports.

Countless bets have been made and theories struck about when, exactly, Beijing will give the official go-ahead. China needs to award licences soon if it wants to offer high broadband Web quality for visitors to the 2008 Olympics.

Most of the 10 trial cities -- Beijing, Shanghai, Qingdao, Xiamen, Baoding, Guangzhou, Shenzhen, Qinhuangdao, Tianjin and Shenyang -- will host Olympic events.

But the relevance of even the long-assumed Olympics deadline may have faded with the TD-SCDMA trial extension, analysts said.

"Guessing the timetable of 3G licensing is not that meaningful now," said Norson Telecom's Dong. ($1=7.755 Yuan) ((Editing by Edwin Chan & Ian Geoghegan;; Reuters Messaging:; +86-21-6104-1791))

Seems like the hot money in hongkong stock exchanges is about china telcom companies. I'm sure that some of the 10 billion contracts will spill over to Longcheer, as it is one of the leading handphone design companies over there. From the analysis, it seems that the delay in 3G annoucement now, is due to the delay in issuing licenses to companies and not a delay in building the network. It's clear that the contracts will be handed out to major handphone companies, some of which are clients of Longcheer. The license have to be announced early so that the companies have time to roll out the full services of the network. Olympics is scheduled to be held in August 2008, so there's a good chance that license are given this year so that companies can prepare in advance for next year.

That ALONE should be reason to believe in longcheer.

BTW, China already announced an increase in interest rates. I hope hsi won't take a beating next week. Some analysis of hsi report that a lot of people are holding long positions over the holiday because they believe the first trading day of the year of the pig is going to be a good one. Whatever, seriously...knowing analysis..but I do hope hsi will hit 21 000 target. Cheers!

Happy chinese new year!