China's fixed-line telecommunications giants will probably achieve another two years of robust growth in the controversial Xiaolingtong city-wide wireless service, long enough for them to recoup their investments in the network before third-generation (3G) mobile services start.
Analysts are bullish about the short-term growth prospect of the Xiaolingtong, a semi-mobile service operated by China Telecommunications Corp and China Netcom Corp to poach customers from the licensed mobile operators. The service, also known as Little Smart, is a wireless local loop network that allows mobile phone operation within a city.
Market watchers expect the service to sign up more than 20 million subscribers within two years, which will bring the total user base to about 40 million.
Xiaolingtong recorded explosive growth last year, with users more than doubling to an estimated 10 million to 12 million, accounting for about 15 per cent of the country's growth in overall cellular users. Beijing-based Norson Telecom Consulting marketing director Allen Chen said Xiaolingtong would continue to expand before a higher speed and capacity 3G service was launched in China.
'In the coming two years, no matter how hot the talk on 3G, as long as there is no major regulatory barrier, Xiaolingtong will continue to register tremendous growth.' He said 3G was only 'empty talk' at the moment, as the Chinese government was unlikely to issue licences until the middle of next year, while the service would not be launched until 2005 at the earliest.
Norson estimated the fixed-line operators had invested 22.2 billion yuan (about HK$20.84 billion) in launching Xiaolingtong networks in hundreds of cities in China over the past two years.
The telecoms research firm expected the operators to put another 23 billion yuan into Xiaolingtong in the coming two years to expand coverage of their networks.