3G cell standard set to take root in China

reuters.com
3G cell standard set to take root in China
Mon Nov 21, 2005 2:42 AM ET16
By Doug Young

HONG KONG (Reuters) - China's home-grown third-generation (3G) mobile telecoms standard is set to take root as more big industry names back it and as the prospect of soft loans and technical support attracts developing market interest.

But first, China must prove outside critics wrong by building and operating a system that works, industry executives say.

The government has spent hundreds of millions of dollars to develop the standard, known as TD-SCDMA, over the last few years.

The plan, once dismissed by many outsiders as a pipedream, has gained slow but steady momentum in the last year, with most of the world's major telecoms equipment vendors signing on with Chinese partners to support the technology.

"I think TD-SCDMA will play a role in China, and I wouldn't be surprised if smaller markets outside China do some testing in less complex environments," said Michael Tatelman, North Asia manager of the mobile devices unit of Motorola Inc.

"China is great at promoting and exporting standards," he said on the sidelines of the 3G World Congress this week in Hong Kong. "So is private business there. Like anywhere else, there's a cooperation between government and private enterprises."

Motorola, like a number of other global telecoms equipment makers, has said it will support TD-SCDMA through joint ventures and less formal tie-ups.

Others on the list include Ericsson (ERICb.ST: Quote, Profile, Research), Nokia Oyj (NOK1V.HE: Quote, Profile, Research), Siemens AG (SIEGn.DE: Quote, Profile, Research), Alcatel (CGEP.PA: Quote, Profile, Research) and Nortel

U.S.-based Lucent Technologies (LU.N: Quote, Profile, Research) became one of the last to fall into line. The company told Reuters it was forming an alliance with China's Datang Telecom Technology Ltd. (600198.SS: Quote, Profile, Research) to develop TD-SCDMA systems.

DEVELOPING MARKETS

Industry observers point out that the technology would be especially suitable for developing markets, since China is likely to provide strong support via soft loans, other financing and technical support for anyone who builds a system.

Such support was a key factor in promulgating the world's two second-generation (2G) mobile standards, GSM and CDMA. GSM was strongly advocated by governments of Western Europe, and by companies including Ericsson and Nokia, while CDMA was backed by the United States and by companies including Qualcomm Industry experts reckon TD-SCDMA could exist alongside two other high-speed cellular technologies: WCDMA, already in use in Europe and Japan, and CDMA2000 1x, used in North America.

"TD-SCDMA is being sponsored by China just like GSM was sponsored by Europe," said Bob Mao, president of Greater China for Nortel, also on the sidelines of the congress.

"China has been very methodical to make sure the technology is robust. That's why it's taking so long" to roll out fully commercialized products.

ROMANIA SIGNED UP

One developing market -- Romania -- has already signed on to the standard, and is testing out a trial network with China's No. 2 telecoms equipment maker, ZTE Corp. (0763.HK: Quote, Profile, Research) (000063.SZ: Quote, Profile, Research), a ZTE executive told Reuters.

But most observers say China will have to show the technology works by building its own broader system before it embarks on any major campaign to spread the technology abroad.

Such a development looks virtually certain to happen next year, when the country is expected to award 3G licenses.

Most observers expect either three or four licenses to be given out, with at least one of those requiring its holder to build either a partial or complete network based on TD-SCDMA.

"We do believe that China is a country which is big enough to have more than one technology available," said Philippe Keryer, president of the mobile communications group for France's Alcatel (CGEP.PA: Quote, Profile, Research). "There is a significant market for TD-SCDMA in China. It is opening the door for using the technology outside."

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