An exciting year for China’s telecommunications sector

2008 is shaping up to be an interesting year for China’s telecommunications sector for two reasons: 1) China will begin testing its home-grown TD-SCDMA (Time Division-Synchronous Code-Division Multiple Access) technology to deliver 3G mobile communications and 2) the government is expected to announce a big restructuring of its telecommunications services industry.

At the moment, mainland China has not rolled out nationwide 3G services, which are becoming widely available now around the world. Existing services in other parts of the world are based on either the WCDMA (Wideband Code Division Multiple Access) or the CDMA2000 (Code Division Multiple Access 2000). Other 3G standards have already been in commercial use for about four to five years, so China can be said to be behind in introducing 3G services.

China Mobile has built out a trial 3G network in eight major cities in China based on the TD-SCDMA standard. Although parts of the TD-SCDMA standard are based on foreign technology, key parts of the standard rely on homegrown Chinese patents and technology. As a result, implementing the standard is likely to be cheaper for Chinese manufacturers and service providers as royalty payments to foreign holders of mobile technology patents can either be reduced or eliminated through patent cross-licensing. The delay in introducing 3G services in China is likely due to China’s desire to give its domestic networks a chance to use TD-SCDMA technology, which has been slower in development.

Sometime this year, China is also expected to announce a restructuring of its mobile telecommunications industry. Industry watchers believe China Unicom is likely to be broken up and its assets sold to fixed-line operators China Netcom and China Telecom. In the end, three players would then provide a broad array of telecommunications services in China: China Mobile, China Netcom and China Telecom.

With so many changes in store for 2008, the outlook for the telecommunications industry in the years to come will be heavily dependent on how things transpire in the Year of the Rat.