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3G Licences

3G licences coming to China and India

Other Topics: WiMAX Funding, WiMAX Network Portland

January 10, 2009

In January 2009, all eyes are on the long-awaited 3G licences in China and India. Today, the Chinese regulator officially announced the issuing of 3G licences to its three operators. In contrast, India has (again) postponed the kick-off date for the auction of 3G licences, to the end of January 2009.
3G licences will boost investment

Both China and India's mobile markets are booming. On average, over 7 million new subscribers were added every month in 2008 in each market. Each has a population of over 1 billion and a mobile penetration rate of less than 50%, so there is still huge potential for growth in both mobile markets. Therefore mobile operators in both markets have strong incentives to obtain a licence and invest in 3G.

3G services have already been tested in both these markets in 2008. Therefore issuing licences does not initiate 3G investment but will accelerate it, so we expect to see a new wave of telecoms infrastructure investment following the granting of the licences. The Chinese government estimates that the issuing of its 3G licences will result in Rmb300 billion ($41 billion) in 3G investment.

Each market also has different foreign direct investment (FDI) rules, so the 3G opportunity is different for India and China. India limits FDI in its telecoms industry to 74% and permits foreign operators to bid for its 3G licences. We expect that this will attract many international carriers to bid. In contrast, China s FDI level is only 49% and it has not made any 3G licences available to foreign players.

Nonetheless, vendors will welcome the news in both markets. It is a golden opportunity for global equipment and handset vendors at a time when there are few signs of growth.

China s 3G licences were predictable

As expected, today s announcement confirms that China Mobile, China Telecom and China Unicom will receive the TD-SCDMA, CDMA2000 1XEV-DO and WCDMA licences respectively.

There has been much talk about EV-DO and WCDMA being more established and widespread 3G technologies than TD-SCDMA, but we don t believe this is much of an advantage for China Telecom and China Unicom. Firstly, China is a huge market and is certainly a big enough market for TD-SCDMA to thrive. Secondly, let s remember that China Mobile controls around 70% of China s mobile market and this will not drastically change in the short term. Thirdly, TD-SCDMA is China s home-grown 3G technology, so it has immense government backing. Therefore we believe that it is not a matter of if TD-SCDMA will succeed, but a matter of when.

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