China’s 3G licenses finally on the move

Posted by Nicole McCormick Monday, January 5th, 2009

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China’s cabinet, the State Council, has finally given its approval for three 3G licenses to be issued, some seven years after industry pundits first started speculating that 3G licenses may not be too far away.
The announcement of January 31 could ultimately see the mainland’s 3G licenses being actually issued to its three mobile operators – China Mobile, China Unicom and China Telecom - come early 2009.

The State Council has signed off on the issuance of a license for Chinese home-grown 3G air interface TD-SCDMA, and a license apiece for global 3G air interfaces, WCDMA and CDMA2000.
Whilst the State Council did not say which operator would receive what license, China Mobile will very likely have to carry the burden of the technically immature TD-SCDMA standard, whilst Unicom and China Telecom will likely roll out WCDMA and 1xEV-DO platforms respectively for 3G.
Formal cabinet approval for 3G has been a long time coming. Hong Kong awarded its four 3G licenses as far back as October 2001, sparking speculation that 3G licenses would be issued to Chinese operators soon thereafter.
The big issue for China however was that issuing 3G licenses has been ultimately tied to the restructuring of its operators. Essentially, the issue was whether to carve up Unicom or not. And therein laid the great debate of the last few years for regulators and policy-makers in China – should Unicom sell one of its mobile arms, or not?
Amidst the debate, fixed line subscribers and eventually fixed line revenues fell for China’s two fixed line operators, China Telecom and China Netcom.
Meanwhile, China Mobile went from strength to strength and Unicom failed to make a go of running two mobile arms – GSM and CDMA – side by side. In turn, this left China Mobile with an ineffective rival, and it grew even bigger.
China Mobile’s extreme dominance of the market, finally got noticed and in May, the powers that be decided that Unicom’s CDMA arm should be sold to China Telecom. The government also decided that Netcom should be folded into Unicom. Thus, in one foul swoop, China emerged with three integrated operators – China Mobile, Unicom and China Telecom – in a bid to level the playing field.
And so, on the last day of 2008, the State Council indicated that with the industry restructuring virtually complete, it was now appropriate for TD-SCDMA, WCDMA and CDMA2000 licenses to be allocated.
According to the State Council, 3G will stimulate mobile demand, increase competitiveness and allow the TD-SCDMA value chain to gain maturity.
The State Council however did not say when licenses would be issued – it only said that licenses would be allocated in an orderly manner.
It’s now up to the Ministry of Industry and Information Technology (MIIT) to officially issue the licenses, and whilst that shouldn’t be too long a process, nothing can be taken for granted in the highly complex Chinese market.