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Analysis: 3G licenses issuance predicted to prop up econony
BEIJING, Jan 08, 2009 (Xinhua via COMTEX) --
China's issuance of 3G licenses is
expected to help drive up the country's GDP by 0.5-1 percent,
according to Yang Peifang, general secretary of Telecom Economic
Expert Committee with the Ministry of Industry and Information
Technology (MIIT).
China issued the 3G mobile phone licenses to its top three mobile
carriers on Wednesday, which are expected to invest at least 200
billion yuan in the technology this year.
China Mobile (0941.HK; CHL.NYSE), gets TD-SCDMA license, China's
self-developed standard. China Telecom (0728.HK; CHA.NYSE) has
CDMA2000 license, and China Unicom (0762.HK; 600050.SH; CHU.NYSE),
WCDMA license, which are developed by the US and Europe,
respectively.
The 3G high-speed networks are capable of handling faster data
downloads, serving high quality calls, and processing multi-media
documents such as images and music.
This technology will allow handset users to access the Internet,
make video phone calls, play video interactive games, process payment
and shop via handsets, according to Yang.
Chen Jinqiao, deputy chief engineer of the China Academy of
Telecommunication Research under the Ministry of Industry and
Information Technology (MIIT), said that investment in the sector is
expect to reach peak in the following two or three years, driving
social output up by nearly 2,000 billion yuan and stimulating
3G-related industrial chains.
The country's biggest cellular phone network, China Mobile has
begun to promote its 3G brand in full swing, named G3, on Wednesday.
Its trial TD-SCDMA networks served eight Olympics cities during the
Olympics Games in 2008 held in Beijing in August last year.
Wang Jianzhou, president of China Mobile, said at the year-end of
2008 that the company planned to set up 145,000 base stations by
2011, covering 95 percent prefecture-level cities in China.
China Unicom, another major cell phone network with its focus on
broadband mobile Internet services, has started 3G testing in seven
cities and plans to launch WCDMA services within the year.
It earlier announced that it would invest 100 billion yuan for
WCDMA network construction. The market expects 45 billion for 2009
and 55 billion for 2010.
The fixed-line operator China Telecom's CDMA network construction
budget for 2009 to 2010 amounted to 80 billion yuan, but analysts
believed that the actual investment in 2009 alone would range from 50
billion to 60 billion yuan.
In the January-November period of 2008, telecom industry in China
accumulated investment of 215.7 billion yuan, up 14.9 percent year on
year. In November, the investment amounted to 30.7 billion yuan,
hiking 59 percent, a record high growth rate in 2008.
According to analysts from Shenyin & Wanguo Securities (SYWG), the
3G licenses will not only boost investment in telecom system
equipment, but also help related industries achieve continuous
progress, such as end products, communications facilities, test
instrument, video services, information services and software
development.
In addition, more public biddings, which will come after the issue
of 3G licenses, will be launched to support the performance growth of
qualified equipment providers in 2009.
Domestic equipment providers, especially end product providers,
have benefit a lot from 3G projects investment.
One example is ZTE (000063.SZ; 0763.HK), one of the major end
product providers, the A-share price of which has surged by more than
60 percent since last November.
Chinese government sees the development of 3G networks as an
important step made in boosting domestic demand and optimizing
telecom market competition.
China is expectable to develop 500 million 3G users within five
years and the fourth generation (4G) mobile telecom technology will
be exploited in the short run, with 2G and 3G technology being
developed in the meantime, estimated Chen.
An on-line survey at Sina.com on Wednesday found that 65 percent
of the 130,000 respondents said they would choose 3G network service.
Statistics show that the mobile business revenues of CMCC and
Unicom Group amounted to 230 billion yuan in the first half of 2008,
three quarters of which were from traditional voice services.
Some analysts believe that upon 3G networks expansion, revenue
from value-added services focusing on data transmission is expected
to increase to account for half of the carriers' total revenue.
However, others call on prudent views on the future of telecom
indusry, as uncertainties still hanging over the market.
Currently, the telecom board on stock market has higher valuation,
comparing to the electronic industry as a whole.
Share prices of 3G concept stocks on the Shanghai and Shenzhen
bourses retreated Wednesday over the news, largely for profit-taking
as these stocks outperformed the market in the past two months.
On the same day, China Mobile H-share went down 5.48 percent to
close at 78.45 HK dollars; China Telecom shedded 5.02 percent to 3.03
dollars; and China Unicom dropped 10.6 percent, to 9.19 dollars.
Some experts, citing the disappointing experience on 3G in other
regions, said that the 3G technology, which is a high-tech product
unlike daily consumer goods, might take longer than expected for the
public to accept.
Chen suggested carriers to promote services for the public and for
high-end customers at the same time, and gruadually cultivate the 3G
consumer market, as it is unlikely for the majority of subcribers to
pay for the non-voice data transmission services in the short term.
Statistics show that by December 5, 2008, there were 337,000
subscribers of TD cellular service, which, according to industrial
experts, were far not enough for China Mobile to make profit.
To attract more customers, carriers have launched some low-cost
packages on the market. Price competition, together with the weak
demand brought by gloomy economy, will hurt the industry's
profitability.
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