China issues 3G licences to main carriers

BEIJING (Reuters) - China handed out long-awaited licences for next generation (3G) mobile networks to its three state-run carriers on Wednesday, paving the way for billions of dollars in spending.

A man uses his mobile phone at Beijing's Wangfujing Street January 7, 2009. REUTERS/Jason Lee

As announced last month, China Mobile, the world’s largest mobile carrier, was given a licence for TD-SCDMA from the Ministry of Industry and Information Technology, the official Xinhua news agency said.

Smaller rivals China Unicom and China Telecom were allowed to develop WCDMA and CDMA 2000 networks, respectively, after the completion of a telecom industry reshuffle since last April, Xinhua said.

The TD-SCDMA technology that China Mobile gets is domestically developed and heavily backed by Beijing, but has only gone through test trials and could be more costly and complicated to roll out.

The two versions awarded to China Unicom and China Telecom are widely used around the world and should be easier to deploy and service than TD-SCDMA.

“Market expectations have been completely factored in. That’s why share prices of the three companies are heading south,” said Fang Lu, a telecom analyst with Shenyin Wanguo Securities in Shanghai.

China Mobile fell 4.6 percent in late trade, lagging the main Hong Kong index’s 2.5 percent drop. China Unicom, which had soared nearly 17 percent on 3G speculation, dropped 9.7 percent, while China Telecom fell 5.6 percent.

All three stocks had rallied on hopes that Chinese telecom companies would be able to offer 3G network services soon, after Beijing approved issuing the licences last week.

The ministry said last month that spending on equipment by carriers would total $41 billion (27.6 billion pounds) over the next two years.

China Unicom and China Telecom are expected to grow faster than China Mobile in terms of new users and sales after securing licences for the world’s two mature technologies, said Fang, whose brokerage rates China Unicom “outperform” and is “neutral” on Telecom and Mobile.

China Mobile will continue to see rapid subscriber growth in rural areas, where its lead in network coverage is unlikely to be challenged by rivals in the short to medium term, ratings agency Fitch said in a January 6 report.

In Chinese cities, China Mobile’s network will still be the best over the next 2-3 years, Fitch noted.

“However, its weaknesses in 3G technology and broadband will be a challenge and the company could lose market share to its competitors, especially among mid- to high-end subscribers,” it added.

Editing by Kirby Chien & Ian Geoghegan