China government uses 3G licenses as incentive for telco reforms
By Colleen Taylor, Contributing Editor -- EDN, July 26, 2007
As analysts forecast a bright future for the widespread adoption of the 3G wireless standard, China's government is said to be using the next-generation technology licenses as incentives for the country's major telecommunications companies to adopt it sees as much-needed industry reforms.
According market research firm iSuppli Corp., China's National Development and Reform Commission (NDRC) believes that a fundamental restructuring of the nation's telecom industry is essential to promote the long-term growth of the country's fixed and wireless core communications networks.
To push the acceptance of these reforms, iSuppli said that the Chinese government is using 3G licenses to the four state-owned telcos -- China Mobile, China Unicom, China Telecom and China Netcom -- as incentives.
According to iSuppli, much of the responsibility for reforms can be attributed to China Mobile, which, the firm reported, has a "near monopoly" in China's mobile communications market. China Mobile has a whopping $37.8 billion in yearly revenues, which accounts for 76 percent of the nation's total mobile communications revenue. China Mobile also had a net profit of $8.5 billion last year, which, iSuppli said, is 10 times the profit of China Unicom, three times that of China Telecom and six times that of China Netcom.
"The NDRC and the Ministry of Information Industry (MII) want China Telecom and China Netcom to offer both fixed-line and wireless services so consumers will have more of a choice," iSuppli Analyst Kevin Wang said in a statement. "They are wiling to use 3G licenses in exchange for a fundamental change in China's telecom industry."
iSuppli said it believes that China will issue three licenses during the first half of 2008. 3G licenses seem poised to work as a bargaining tool; iSuppli predicts that a key revenue driver in China in the coming years will come from the applications that will be enabled by 3G. iSuppli forecasts China's 3G value-added services market will grow to $19.5 billion in revenue by 2011, maintaining a compound annual growth rate (CAGR) of 17.4 percent from $8.8 billion in 2006.
