|3G Comes To China?|
Shu-Ching Jean Chen 12.07.06, 10:50 AM ET
Deck The Halls
Hotel Stays For The Holidays
Following Borrowers Abroad
Small Manufacturing Research
Can Readers Report?
CHL 40.52 - 0.80
CHU 11.99 + 0.13
QCOM 39.81 + 0.63
Most Popular Stories
Bitten By The Google Spider
Gallaher Shares Surge On Bid News
The Boss Entertains
Business Has A Prayer
Digital Power: Where's The Moolah?
Hong Kong - For years, one of the great high-stakes mysteries of the telecom world has been just when China would move toward issuing third-generation (3G) telecommunications technology licenses, an event that could open up a whole wild frontier for global telecom equipment vendors, as well as handset makers.
That puzzle might soon be solved, but the answer may not be what the industry is looking for, since the entire issue remains clouded by China's efforts to take its own separate path.
A corner of the curtain was lifted this week by some off-the-cuff remarks by two executives from the country's two fixed-line telecom operators, China Telecommunications and China Unicom (nyse: CHU - news - people ), who predicted that the timing could be just around the corner and that an announcement could come as early as this month.
The optimistic comments made Tuesday by Leng Rongquan, president of the country's largest fixed-line operator, China Telecom, and Zhuo Xusheng, CEO of China Netcom, its smaller rival, helped boosted China Telecom stock, with a one-day rise of 15% to a record close of HK $4.10, while China Netcom surged 8.5% to HK $16.16. Investors were betting both companies would get a 3G license, allowing them to get involved in the high-growth mobile sector.
Their shares posted more subdued activity on Wednesday and Thursday on worries over the additional financing burdens that could arise from costly investment in 3G technology and equipment.
The two Chinese telecom executives who discussed the prospects of 3G were speaking on the sidelines of a global telecom conference, International Telecommunication Union, which is being held this week in Hong Kong. It's the first time the group has met outside of Geneva since it was founded in 1971.
The Chinese executives have long been bullish about the timing for China to push for 3G development, despite delays of nearly three years. They are at the forefront of promoting 3G business as a way to tap new growth.
Their latest optimism was greeted by an industry that appears to believe almost unanimously that China will move to ensure the availability of 3G networks ahead of the Beijing Olympic Games in the summer of 2008.
"All these reports suggest China is trying to keep its promise to issue 3G licenses ahead of [the] Olympics," said Jing Wang, chairman for Asia Pacific at Qualcomm (nasdaq: QCOM - news - people ), the U.S. company whose technology powers most 3G devices.
But some long-time industry analysts also noticed a conflicting and more authoritative report released at the same time by China's official Xinhua News Agency, which quoted Wang Xudong, China's Minister of Information Industry, who said his ministry has no plans to restructure domestic telecommunications industry for 3G mobile licensing. "I haven't studied or contemplated the matter," Wang said.
Intriguingly, Wang himself was the one who raised hopes a year ago for a definitive 3G licensing by forecasting that 2006 was the year for the government to "finish formulating policies for the development of 3G technology and business."
Issuing 3G licenses in China would inevitably have to involve an industry-wide restructuring, because it would call for redistribution of assets among the country's four state-controlled telecom operators: China Telecom and China Netcom, as well as their two mobile counterparts, China Mobile and China Unicom.
All the mixed signals over the arrival of 3G service are a hallmark of China's telecom regulatory regime. "There is no transparency and clarity in China's 3G policy," said an analyst who spoke on condition of anonymity.
The issue is being compounded by Chinese worries over the commercial merits of 3G, the lack of home-grown technology and evolving domestic politics.
China has been keen to promote its own 3G technology standard, called TDS-CDMA, which is different from the two world standards, CDMA2000 and TW-CDMA. The repeated delays in issuing 3G license in part owe to the lack of any successful commercial products developed by China for the TDS-CDMA systems. (Chinese officials can be so stubborn to acknowledge that)
While the Ministry of Information Industry has been the industry regulator, its policy is also being influenced by the eventual state owner of all Chinese government-controlled companies, the powerful new state agency, State-Owned Assets Supervision and Administration Commission.
There are also worries about a Chinese decision that could limit the scale of 3G rollout to cover only the few million residents of Chinese cities that would help stage Olympic events: Beijing, Shanghai, Qingdao, Tianjin and Qinhuangdao.
With less than two years until the Beijing Olympics, Chinese telecom officials would have to make up their minds soon.