China Mobile to Launch TD-SCDMA Commercial Trial in April

China Mobile Communications Corp, China's largest mobile operator, will launch a commercial trial of the country's locally developed 3G mobile standard next month, Dow Jones reports, citing President Wang Jianzhou, though he declined to disclose the scale of the trial. China Mobile Communications Corp, the parent of Hong Kong-listed China Mobile Limited, has been building trial networks based on the TD-SCDMA standard in eight cities, including Beijing, the capital. Wang said China Mobile Communications had ordered TD-SCDMA handsets and equipment from six companies including Lenovo, ZTE, Hisense Electric, LG Electronics, Samsung Electronics and Guangzhou New Postcom Equipment. He said the company has also bought data cards from ZTE and Datang Telecom Technology.

Outlook and Implications

• A Step Further to 3G Commercial Launch: The launch of a commercial TD-SCDMA trial suggests China's home-developed 3G technology is moving further towards readiness for commercial deployment. China has been delaying the move to issue 3G licences, partly because it wants to give more time for preparing TD-SCDMA for commercial launch, and partly because the government plans to reform the telecoms industry. Recent reports by the state media about the upcoming restructuring of China’s telecoms industry suggests that an official announcement on the restructuring will be made soon, which will pay the way for 3G licensing and commercial deployment. If the TD-SCDMA commercial trial goes well, China may after all be able to deliver its earlier promise to showcase TD-SCDMA at the Beijing Olympics (see China: 22 February 2008: Under the Spotlight—China Close to Finalising Industry Restructuring Plans).
• Restructuring to Better Prepare Fixed-Line Operators for 3G: The proposed restructuring plans to merge China Mobile with China Tietong, the country’s third-largest fixed-line operator, China Telecom, with China Unicom’s CDMA network assets, and China Netcom with China Unicom’s GSM network assets, could give the country’s fixed-line operators a leg-up to 3G. With CDMA and GSM assets respectively, China Telecom and China Netcom will be in a better position to compete with China Mobile and develop a 2G to 3/3.5G migration strategy once 3G licences are issued. Therefore, the two are likely to avoid the problems encountered by the few 3G greenfield operators in Europe. The sustainability of Hutchison Whampoa's Italian and U.K. 3G operations in particular have been negatively affected by the heavy up-front 3G licence and investment costs, as well as the relatively high operating expenses in order to create a distribution network and a brand through advertising. By avoiding the greenfield 3G route, the MII will give the opportunity for China Telecom and China Netcom to build robust and profitable mobile operations.
• Risk in Deploying New Technology: China has not rushed towards 3G and as such should avoid some of the early pitfalls experienced by European and Japanese operators: problems with 2G/3G handover and a lack of handsets. TD-SCDMA, China's own version of 3G, is likely to be deployed alongside W-CDMA/HSPA and CDMA 2000 1X/EV-DO. Under Ministry of Information and Industry (MII) guidance, there has been considerable testing of TD-SCDMA. Nevertheless, the widescale deployment of a new technology (TD-SCDMA) will be a risk given the difficulties experienced by other major operators (such as Sprint Nextel) in integrating and operating different network technologies. The MII could help China's mobile operators, which all look likely to deploy TD-SCDMA in parts of their networks, by allowing network sharing and thereby reducing capital expenditure costs.