When will China finally issue 3G licenses and restructure the telecom industry? Lehman analyst Tim Luke released a note to clients following Monday's meeting of China's telecom regulators. Here is a short excerpt:
Yesterday, China's Ministry of Information, during the China Telecom Planning Meeting highlighted that the key decision making time for 3G licensing has arrived, and that TD-SCDMA will play a role in China's 3G build out. Representatives specifically noted that various 3G technologies have been well-tested in the last three rounds of technical trials, and that 3G handset prices have also come down significantly in the past year. While our Asia Telecom colleagues (led by Alan Hellawell and Lu Sun) still expect licenses only by mid-2006, we believe the comments represent increasing evidence that the Chinese government is indeed advancing its thinking and planning processes around 3G licensing. We note that the MII's commentary did not include further details, including structure of the industry, number of licenses, and technological standards - all critical considerations when examining the potential impact of China's 3G spending on the wireless equipment food chain.
Comment: Lehman went on to say that the shift to 3G could impact spending on 2G and PHS networks. However, 2G GSM and CDMA spending may not change in the near term. (Note: UTStarcom (ticker: UTSI) is especially vulnerable in the event of a downturn in PHS spending.) Lehman also believes that international handset vendors will likely benefit from the move to 3G -- as will Qualcomm (ticker: QCOM), Nokia (ticker: NOK), Motorola (ticker: MOT), Samsung, SonyEricsson, LG, ZTE, Huawei and Bird.