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Following on from the distribution of 3G licences earlier this year for China’s three mobile networks, China Mobile (NYSE:CHL), China Telecom (NYSE:CHA) and China Unicom (NYSE:CHU), along with the convoluted technology demands imposed by the regulator, signs are that Nokia (NYSE:NOK) will be sitting a little higher up the table at the tea party, as Chinese news portal Xinhua reports:

“China hopes Nokia will enhance cooperation with China’s information sector and play an active role in developing China’s TD-SCDMA industry," Chinese Vice Premier Zhang Dejiang said.

As we reported earlier this year (China looks to 3G networks to help stimulate economy), each of the operators is working on a different standard. China Telecom will work on the US standard CDMA 200, Unicom has gone down the W-CDMA route, whilst China Mobile has invested a veritable fortune in its home-grown standard TD-SCDMA.

From a political standpoint, it is pretty much a given that TD-SCDMA will not be allowed to fail, as the government is very much behind these moves. So what does this mean for equipment vendors ?

Basically, it has resulted in Western vendors like Alcatel-Lucent & Ericsson (NASDAQ:ERIC) being marginalised when it comes to participation. Alcatel (NYSE:ALU) has managed to win business in 14 regions to partially satisfy China Unicoms requirements, whilst also signing $230 million worth of contracts with China Telecom.

“The drive for 3G (in China) is a very important stimulus for what I think is a very exciting market to come,” Ben Verwaayen, chief executive of Alcatel-Lucent, told reporters in Beijing yesterday. “If you look to the market and the economic crisis today, it is good to see that China is going to play a more prominent role than ever before.”

Ericsson has stated that it has picked up 30% of China Unicom's 3G network requirements, leaving Chinese vendors Huawei & ZTE (OTCPK:ZTCOF) to fight over the spoils, with Huawei reportedly being the big winner.

So what about Nokia? Back in March, Nokia-Siemens Networks (NSN), a subsidiary of the Finnish mobile giant, announced the signing of framework agreements with both China Mobile and Unicom for up to US$1.1 billion in orders. NSN is one of the less recognised parts of Nokia’s business, however, it is definitely a division not to be ignored. Q1 2009 showed that NSN contributed 34% of group revenues.

Nokia has already provided major infrastructure deployments on China Mobile’s Phase II deployment of 3G network, on its testing rollout in Hainan province. Now with equipment currently being deployed across 28 major cities throughout China, Nokia Siemens Networks has provided the top performing city networks based on 3G TD-SCDMA commercial readiness, as laid down by the Chinese telecoms regulator.

“We are very confident of our 3G TD-SCDMA solution and feel proud to showcase its capabilities. Nokia Siemens Networks has provided us such tremendous on ground support, that our 2G and 3G TD-SCDMA networks are optimized and ready to handle high throughput and access rates demanded by cutting edge applications,” said Zhou Chengyang, President of Hainan MCC. “We have laid a solid foundation to launch commercial services in the Hainan province and are looking forward to working closely with Nokia Siemens Networks towards large scale and high quality TD-SCDMA services.”

So the expectation is that this success will bleed over into Nokia’s main revenue driver, handsets. China Mobile is now becoming more of a commodity player with regards to handsets, as it is now looking to more rural areas for subscriber growth. My expectation is that Nokia will play a major part in this area, as discussed in a previous post, Nokia has a very strong back-catalogue of handsets to pick from and also enjoys higher margins in the low end sector than its competitors.

Having picked up on the Nokia ADR earlier this month and also enjoyed the $0.52 dividend yesterday, I had planned to drop 50% of my holding to place elsewhere. With this morning's news on official support for Nokia, I will now be holding a little longer term, looking for a target of $18.50 towards the end of the year.

Disclosure: Long NOK.

Source: Nokia Receives an Official 3G Thumbs Up from China