Get Out of the Way, Chinese 3G Licensing Coming Through!

Author: Jake Saunders, Vice President of Forecasting

Tue, 6 Jan 2009 02:59:10 EST

In early January 2009, China's State Council, announced that it has formally given approval for 3G licenses to be issued. While this is not quite the same as licenses having been issued, it does mean that Government Machinery can start to draw up the documents, conditions and covenants for the granting of licenses.
Why the hold up? Why has China taken so long to issue licenses? There is no straight forward answer, but the fundamental rationale has to be that the Chinese Authorities wanted to given its own domestically developed standard (TD-SCDMA) the best possible opportunity to compete against the alternative 3G standards of W-CDMA and CDMA2000. Hopefully the internvening time has been well used by the TD-SCDMA developers to make sure the technology has the right performance characteristics in handsets and base-station infrastructure to be success. A secondary argument for the delay can also be attributed to the telecoms restructuring. China Unicom's CDMA network was trasnferred to China Telecom, to establish a third mobile operator but fundamentally the restructuring could have taken place earlier. Granting 3G licenses prior to the restructuring would have muddied the waters and made the splitting of assets even more difficult.
Despite the delays, merited or not, expect 3G licensing to be ratified and granted in short order. Certainly by the end of March 2009. Why the sudden urgency? Two reasons:

a) The Chinese economy needs all the influsions it can get. As the US sub-prime crisis has clashed into the US economy, and the US slowdown as pulled down the other Developed economies, emerging market economies, like China and India, have slowed substantially. Government departments are still forecasting growth, but at 7~8 percent this is just keeping ahead of population pressures and migration of demographics between the rural and urban communities. China is therefore kick starting a number of economic stimulus packages. 3G licenses represent as US$ 41 billion infrastructure build out opportunity that cannot to be missed.

b) By the end of 2009, a 4G wireless access technology, will likely to have gained commercial traction in Japan and the US. The Chinese have plans to integrate LTE into the TD-SCDMA standard but TD-SCDMA needs to get product (handsets, USB dongles) being stacked on retailer shelves and operational services up and running.
The time for trials is over.

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