Industry Exec Discusses China Telecom Restructuring and 3G Licenses (CHL, CHU, CHA, CN)

The next major developments in China are expected to be a restructuring of the Mainland's telecom environment and the issuance of 3G licenses. One of the primary reasons for the 3G rollout delay is believed to be China's continued struggle to successfully develop its own commercially viable wireless standard known as TD-SCDMA. Stephen Falk, a VP at Sprint (ticker: S) is focused on international strategy and business development. In a recent interview he discussed telecom restructuring and 3G. The following are short extracts:

On the Major Problems of Rolling Out a 3G Network in China

I hope China Mobile (ticker: CHL), the largest GSM operator in the world, have gone to school, that it's a forklift from GSM to UMTS. It's not an easy evolution, although the handsets now are much more broadly adopted and there's a much greater selection. Arguably, the price points for some of the infrastructure, whether it's the cell sites or the core, have come down, which will help from a rollout perspective. So in the sense they can learn from past mistakes, that's useful, but there will be a very high cost of deploying UMTS broadly in China, just as there has been in Europe.

I would argue China Unicom (ticker: CHU), with it's CDMA network, has the easiest evolution path, because changing from 1Xr2T to Do Rev-A or Rev-0, which is available now, is a matter of changing out a couple of circuit packs and some software upgrades, so there's not the cost of migrating. So, ironically, China Unicom's smaller network will be a much cheaper and less disruptive one for the customer to move to. It's a more proven technology and it's much less costly. Forrester and Shustack and some other annalists have said migrating a similarly sized GSM and CDMA2000 network is roughly 3 times more expensive to move to UMTS as opposed to CDMA2000.

On Time to Deployment Once 3G Licenses are Issued

China Unicom was able to deploy their CDMA2000 network faster than I think anyone expected. But I think realistically, to have a fully commercial deployment, even a few of the major cities would require at least a year or two, depending on the technology and how mature it was.

On Timing of Restructuring and 3G Licenses

I have no idea about when the restructuring or the issuance of licenses will occur.

The short answer is I don’t know. I meet with government officials form time to time and I believe they are sincere about believing the Chinese market may not be ready for 3G.

Comment: You can access the entire interview here.

Related

• China Mobile's (ticker: CHL) uncertain future.
• UTStarcom (ticker: UTSI) on the timing of 3G licenses.
• Recent China telecom developments.
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