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April 10, 2007 1:15 pm

Chinese telecom suppliers set for 3G win

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China’s ZTE and Datang Mobile appear poised to win an early lead over international rivals in the supply of equipment for wireless networks based on the Beijing-backed TD-SCDMA “third generation” standard for mobile telecommunications.

An industry association and local media said yesterday that ZTE and Datang would between them supply more than four-fifths of 3G base station equipment to be used by China Mobile, the country’s dominant wireless operator, for “trial” TD-SCDMA networks in eight cities.

The success of ZTE, which alone is now expected to account for nearly 50 per cent of initial equipment orders for the networks, suggests international vendors such as Nokia Siemens Networks and Ericsson could struggle to maintain their share of the world’s largest mobile market.

ZTE’s shares climbed more than 13 per cent in Hong Kong yesterday despite the company’s warning on Monday that it has yet to sign any contracts and that investors should “pay attention to risk”.

While ZTE makes equipment for all three 3G standards, analysts at Citigroup cited it late last year as the manufacturer best placed to benefit from the introduction of TD-SCDMA networks.

China Mobile declined to comment on the preliminary results of its tenders for equipment for the trial networks, which are expected to cost the operator around Rmb40bn.

Beijing has long cloaked the nation's 3G plans in secrecy, but the unusually large-scale trial is widely seen as an attempt to give TD-SCDMA's developers more time to get it ready to compete against Europe's favoured standard, WCDMA, or the US-backed CDMA2000.

Chen Haofei, secretary general of the TD-SCDMA Forum, the industrial forum promoting the Beijing-backed standard, said the results of the initial tenders reflected in part a lack of commitment to TD-SCDMA by international vendors.

Companies such as Nokia and Ericsson – which are not members of the industry forum - had not focused enough attention on TD-SCDMA, with global headquarters often slow to wake up to the commercial importance of the Chinese-supported standard, Mr Chen said.

“However, I am feeling that they are now changing their attitude,” he said.

Backers argue that TD-SCDMA, which is short for "time division-synchronous code division multiple access", can provide more efficient use of radio spectrum than rival technologies, although WCDMA and CDMA2000 are far ahead in terms of market use.

There are still far fewer handsets available for TD-SCDMA than for the more established 3G standards and they are more expensive.

XREF Asia only to Investing in China

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