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  • Apr 20, 2014
  • Updated: 10:26pm
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PUBLISHED : Tuesday, 12 March, 2013, 9:24am
UPDATED : Tuesday, 12 March, 2013, 10:20am

4G buzz: who gets what in China

China's telecoms regulator is likely to award 4G licence in the second half of the year, allowing China Telecom and Unicom to build networks based on global technology standards

BIO

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young’s China Business Blog (www.youngchinabiz.com), commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, “The Party Line: How the Media Dictates Public Opinion in Modern China.”
 

Chinese telecoms officials have been speaking non-stop these last two weeks about fourth-generation mobile networks, better known as 4G, making the roll-out of commercial 4G services look almost inevitable as early as the third quarter of this year. But amid all the buzz, the critical question and previously hot topic of which telcos will be assigned to build networks based on what 4G technology standards has quietly disappeared from the discussion.

The lack of noise on that subject leads me to believe that the regulator has abandoned previously rumoured plans that would have forced either China Telecom (0728.HK; NYSE: CHA) or China Unicom (0762.HK; NYSE: CHU) to build a 4G network based on a homegrown Chinese technology known as TD-LTE. Such a requirement would have dealt a major setback to either of these smaller wireless telcos, which have used a technological edge over the last 3 years to grab market share from industry heavyweight China Mobile (0941.HK; NYSE: CHL).

Before we go any further, let's recap some of the many comments that have come from both industry executives and top regulators attending the National People's Congress now taking place in Beijing. Those comments saw Ministry of Industry and Information Technology (MIIT) chief Miao Wei say that 4G telecoms licences would be issued this year, largely conforming with market expectation. After that major pronouncement, Miao quickly moved to temper expectations by saying the complete roll-out of commercial 4G networks will take at least a year. 

Meantime, China Mobile Chairman Xi Guohua and Unicom Chairman Chang Xiaobing have also been speaking freely about the coming arrival of 4G, with Chang saying Unicom is speeding up its preparations to roll out its 4G network. Interestingly, the only person we haven't seen discussing 4G in the headlines is China Telecom Chairman Wang Xiaochu.

Perhaps that's simply because reporters haven't questioned him yet; but some might speculate that Wang's silence comes as his company lobbies aggressively behind the scenes to ensure it gets the 4G licence it wants. Some readers may recall that rumors emerged last year that China Mobile was arguing that the China-developed TD-LTE standard would progress much faster if either Unicom or China Telecom was forced to use the standard in its 4G network.

No one commented publicly on the rumors, but China Telecom moved ahead with trials for a different, globally developed 4G technology that is the natural successor to its current 3G network. I suspect the company has been lobbying non-stop to avoid being forced to build a TD-LTE network. Such a requirement would deal a huge setback to China Telecom, which would face many problems in making TD-LTE compatible with its current 2G and 3G networks.

The lack of discussion on TD-LTE in Beijing these few weeks leads me to believe the MIIT has finally realised the chaos that forcing either Unicom or China Telecom to build a TD-LTE network would create. If that's the case, then look for the MIIT to award 4G licences most likely in the second half of the year, allowing Unicom and China Telecom to adopt global technological standards while requiring China Mobile to use TD-LTE. Such a choice would allow Unicom and China Telecom to use their technological advantage to continue gaining market share from China Mobile, creating a more balanced market, while also promoting the development of the homegrown Chinese wireless telecoms standard.

Bottom line: China's telecoms regulator is likely to award 4G licence in the second half of the year, allowing China Telecom and Unicom to build networks based on global technology standards

To read more commentaries from Doug Young, visit youngchinabiz.com

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