USITO Weekly 5/8/2009: 3rd Phase TD-SCDMA Tender

China Mobile Announces 3rd Phase TD-SCDMA Tender

According to a 5/6/2009 report from sina.com.cn, China's sole TD-SCDMA operator China Mobile just announced tender information for the 3rd phase of its TD-SCDMA network. The new tender is reported to include 39,000 base stations, worth some RMB 8.6 billion (USD 1.26 billion). But sources from the company said that details are not yet available, and official tender documents will be released in mid-May.

The number of base stations in the 3rd phase is thus 1.6 times than that of the 2nd phase. According to China Mobile's earlier plan, its TD-SCDMA network will extend to 328 Chinese cities after the 3 rd phase construction is completed, and by the end of 2009, TD signals will be available in 70% of Chinese territory, and beyond, 100% by 2011.

It is reported that so far eight vendors have registered for the 3rd phase tender: ZTE, Huawei, Potevio, Nokia Siemens, Ericsson, Postcom (Xin You Tong), FiberHome, as well as the consortium of Datang and Shanghai Bell.

During the 2nd phase, the first three winners for the tender were Datang Mobile, ZTE Corp., and Huawei Technologies respectively, followed by Nokia Siemens, Potevio, whereas the traditional behemoth Ericsson ranked the last. In total, the Chinese vendors took as much as 81% of the total shares. Of these companies, Datang Mobile, FiberHome and Postcom, which use equipment of Datang Mobile, gained 40% of the tender. ZTE gains about 25-28% share, Huawei 17-18%, Nokia Siemens 8%, Potevio 6% and Ericsson 4.5%.

As covered in USITO's newsletter last November, China Mobile's 2nd phase scale was 1.53 times that of the 1st round, involved 23,000 wireless base stations in 28 Chinese cities. The company then required that the system equipment be able to evolve to 3.5 gigabytes or above HSDPA and LTE through software and hardware upgrades. Sina.com.cn, 5/6/2009

USITO Notes: The new round of bidding will surely ignite another round of price war amongst the equipment vendors, as the previous two rounds did. Even so, the market breakdown is not likely to change much, i.e., domestic firms will continue to enjoy the lion share while the foreign players get a fraction. This scenario is primarily because of two factors - the first being no doubt the government preference over the domestic TD-SCDMA chain, with a lot preferential and encouraging policies for both the suppliers and users. This can be unfair for foreign vendors to some extent, as it is not in concert with China 's commitment to WTO on terms about opening domestic telecom market. The other factor is the notorious price war. Most domestic vendors are rather adroit in fighting price wars against each other or the foreign rivals, such as Huawei and ZTE in several recent bidding cases quoted prices much lower than their actual cost. In comparison this is the “weakness” of foreign vendors given their stringent or even stubborn marketing rules or corporate codes, as the Chinese media often times analyzed. Thanks to the two factors, foreign vendors always found they need to form a joint force with domestic vendors, even for a fraction of the market.

Unicom to Kick Off 3G Business

On the afternoon of April 28, China Unicom, one of China's three carriers, launched a huge event in Beijing to officially unveil its 3G brand "WO", which marks the beginning of the operator's 3G businesses in China, the world's largest mobile market. Using the new 'WO' brand, China Unicom said it will use three different brand designs to target different market segments.

During the event the company also announced that it will kick off a trial run of its WCDMA services on May 17 in 55 cities nationwide. It plans to offer the service in 284 Chinese cities by the end of this year. In preparation, the company has procured over 40 models of mobile phones for the WCDMA services. The first batch of China Unicom's 3G numbers are to be made available on May 17, the same day its network will commercially launch in the first 55 cities. More numbers and phone plans are scheduled for September. it.sohu.com, 4/28/2009

USITO Notes: To date all the three carriers have released their 3G brand, as well as the strategy for the near term. A few months earlier, China Mobile marketed its TD-SCDMA business as "G3", while China Telecom branded its CDMA2000 1xEVDO network as "E-Surfing". Unicom's "WO" in Chinese means both "I" and "rich", which extends the message of the carrier to emphasize the customer experience and value.

In the initial stage of 3G business offerings, the three carriers have targeted high-end customers, i.e., all charge high tariffs for their services. Tariff policies of the three carriers do not differ much, which signifies that in the initial stage price wars were not yet ignited because of the limited capacity/resources, as they were still operating in a few cities and large scale roll out are not likely to happen within the recent months.

Chinese Industries Encouraged to Upgrade Their Technology

On May 6th, the State Council of China issued a notice, urging them to upgrade their technology to boost market confidence and domestic demand. The notice said it would give "sufficient support" to several industries, including steel, non-ferrous metals, alternative-fuel cars, telecommunication equipment and logistics, to help improve technology. The government would earmark RMB 20 billion (USD 2.94 billion) to support technological upgrading, which was expected to attract RMB 460 billion of private-sector investment as well. 5/6/2009 xinhuanet.com

Member in the News: Chinese Vice-Premier Meets Nokia CEO

China hopes Nokia will enhance cooperation with China's information sector and play an active role in developing China's TD-SCDMA industry, Chinese Vice Premier Zhang Dejiang said when meeting with Olli-Pekka Kallasvuo, president and CEO of the world's largest mobile phone maker Nokia on April 27th. Detail