China looks to the future

21 Jan 2003

China’s telecoms regulator the Ministry of Information Industry (MII) has revealed plans to establish a government-backed universal service fund to subsidise communications services in poorly developed areas. The fund is to be set up as soon as possible, according to MII chief Wu Jichuan in the final yearly report of his five-year term in office; he will be replaced by the Communist Party’s Wang Xudong. Despite his keenness to implement the initiative, Wu Jichuan gave no indication of when he would like to see it happen. The move has been viewed by some industry watchers as essentially a telecoms tax which could cost operators as much as 3% of their earnings. The outgoing MII head also outlined a number of challenges facing the regulator in the future, including the setting of interconnection fees in such a way as to promote competition while inflicting minimum damage on shareholders. In addition he hopes to see the regulator take a hard line in the increasingly hostile price wars between operators which have led to the violation of tariff rules in the quest for market share. There was also general discussion on proceeding with 3G network trials and hastening the completion of a draft telecoms law which has been subjected to a series of delays.

The government is expected to award a 3G concession based on China’s homegrown TD-SCDMA standard this year or next, along with an undisclosed number of cdma2000 and W-CDMA licences. Earlier this week equipment manufacturers Samsung [00830.KS], Datang [600198.SS] and Philips [NYSE: PHG] formed a joint venture – known as T3G – to produce a complete design, hardware and software solution. Through the venture Samsung and other vendors aim to have TD-SCDMA handsets on the market by 2004. T3G has said it will also produce core chipsets and reference designs for TD-SCDMA/GSM dual-mode handsets. Datang and Philips are each believed to hold 40% of the company’s equity, with Samsung owning the remainder.

China