Rumors of a restructuring build as the massive mainland industry eagerly awaits the debut of a homegrown 3G mobile standard
On a quiet street off Renmin Road in the heart of Shanghai lies a China Mobile "Experience Center," where consumers can catch a glimpse of the future of telecom.
A pastel blue façade in a sea of aging, weather-beaten cement and brick structures, this center—and those like it in other major cities—is there to generate a buzz about China's homegrown third-generation (3G) mobile standard, TD-SCDMA. The center's sleek, state-of-the-art interior comprises several large areas showcasing TD-SCDMA handsets, and visitors are invited to pick up the phones and play, exploring the wonders of a new era in communications.
When CHINA ECONOMIC REVIEW dropped by, however, the center was empty save for a security guard and three of the staff. People passed by without casting a single glance at the storefront.
As 3G has yet to be launched in China, none of the phones or services could be purchased. The "Experience Center" was not so much a store as a museum of future possibilities.
"The technology is not perfect yet so there have been no big promotions," one of the staff explained, when asked why business was so light.
The waiting game
China has been waiting a long time for policymakers to agree that TD-SCDMA is ready for commercial launch and issue operating licenses for it and other 3G technologies. But in recent months the drumbeat has quickened with speculation that the telecom industry may be on the cusp of a comprehensive restructuring that will pave the way for 3G.
Handset makers, equipment vendors, wireless value-added service providers and China's own telecom network operators have been itching for a piece of the action.
"The restructuring will provide more opportunities for vendors like us," said David Tang vice president of Greater China sales for Nokia. He added that 3G could open doors to software and services as well as handsets and equipment.
The potential size of these opportunities is enormous. China is the world's largest mobile phone market with over 550 million users as of the end of January, according to the Ministry of Information Industry (MII). China Mobile's 380 million-strong user base is 140 million larger than that of the US as a whole.
Analysys International, a Beijing-based tech research firm, estimates China will have 30 million 3G users by 2011. Around 17 million of them will be using TD-SCDMA—small in terms of the country's mobile market as a whole but significant if the network is running in part on Chinese technology.
"I think the restructuring rumors are starting to rise to a fever pitch," said Mark Natkin, managing director of Beijing-based tech research house Marbridge Consulting. "I think there's a very real plan on the table and now it's a matter of ironing out some final details."
The rumored scenario is as follows: China Mobile will merge with small fixed-line firm China Tietong. Fixed-line giant China Telecom will acquire China Unicom's CDMA network, while the remainder of Unicom will merge with fixed-line carrier China Netcom and operate a GSM network. China Satcom will join a national aerospace consortium.
These mergers would occur at the parent company level, not between the companies' listed arms.
The three full-service telecom operators—each with a mobile and fixed-line business—would then be primed to receive licenses for one of three 3G standards. A CDMA2000 license would be given to China Telecom. A WCDMA license would go to the new Netcom/Unicom entity. China Mobile would run a network based on TD-SCDMA, the least mature of the technologies.
'Not shining'
The technology is being trialed in 10 cities including Beijing and Shanghai. Updates from the trials are a closely guarded secret, but one analyst described TD-SCDMA's performance as "not shining."
There are similar quality concerns regarding TD-SCDMA handsets. Dr Wang Jing, secretary-general of the TD-SCDMA Forum, a community for companies interested in the Chinese-developed standard, said that the handsets and chips have yet to reach China Mobile's features and functionality requirements.
