China boasts 334 million mobile users; mulls 3G launch

14 Jan 2005

Chinese regulator, the Ministry of Information Industry (MII), has reported that there were 334 million mobile phone users at the end of 2004, an increase of 65 million on the previous year. It said it expected the figure to grow to 402 million by the end of this year, which would take the penetration rate to around 33%. The total number of fixed line customers stood at 316 million at the same date, up 53 million in a year. Revenues for the sector reached CNY520.5 billion (USD62.9 billion) at the end of the year, up 1.07% from the CNY515 billion reported in 2003.

Meanwhile the MII is expected to make a long-awaited decision on the award of 3G licences in the next few days, after having been undecided on the matter for several years, much to the annoyance of the country’s main mobile operators China Mobile and China Unicom. The government has been slow to make a decision on the issue, claiming that it is concerned that awarding too many licences could lead to huge losses if the technology fails to generate enough interest.

As far as the advent of 3G is concerned, the big question facing China’s mobile operators is which technological standard to embrace. Following field tests on the country’s three 3G standards – W-CDMA, CDMA2000 and home-grown standard TD-SCDMA (developed by state-backed Datang Mobile Communications Equipment and German equipment manufacturer Siemens) – the MII has concluded that both W-CDMA and CDMA2000 are ready for commercial launch, while TD-SCDMA, although not fully developed, has made significant progress.

The other question which remains unanswered is exactly how many 3G concessions the MII will allocate. It has long been thought that four licences would be awarded; when the regulator began its reorganisation of the fixed line market in mid-2002 it indicated that China Telecom (including its new listed subsidiary China Telecom Corp) and China Netcom would be awarded 2G licences in a bid to bring further competition to the mobile market. However, this has yet to take place, and industry insiders now believe that the state will instead award them 3G concessions. It also looked likely that the MII would issue China Mobile and China Unicom with 3G licences. In December 2004, however, it emerged that it may in fact only award three 3G concessions in a bid to reduce network rollout costs.

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