Fortnightly market intelligence covering China’s TMT sector produced by Beijing-based research firm BDA China exclusively for Hedgeweek readers.
3GÂ China’s telecom
Fortnightly market intelligence covering China’s TMT sector produced by Beijing-based research firm BDA China exclusively for Hedgeweek readers.
3G China’s telecom regulator MII on November 8th completed the MTNet Phase II technical trials of W-CDMA, CDMA 2000 and TD-SCDMA and released the trial results. W-CDMA trials were conducted in Beijing, Shanghai and Guangzhou with 12 equipment vendors participating and 17 handset models featured, including 3 domestic with only minor problems. CDMA2000 EV-DO trials were conducted in the same cities with 9 vendors and 7 handset models and no problems were reported, including a smooth 1x/EV-DO upgrade. One obvious problem for the homegrown contender TD-SCDMA was the lack of vendors involved – Datang, Putian, ZTE & Nortel were the only vendors, but even they lack a commercial base station product and, critically, handsets.
It is clear that market-ready TD-SCDMA remains a pre-requisite for China’s 3G licensing. China would likely allow TD-SCDMA to enter ‘commercial trials’ first (say in March or April of next year), and if it stumbles badly, allow a face-saving combined deployment with W-CDMA and proceed with licenses. To get in touch with BDA’s carrier and vendor analysts, click here.
Regulatory China’s four largest telecom operators have played a bizarre game of musical chairs this month. Wang Jianzhou, former president of China Unicom, becomes head of China Mobile. Former deputy managing director of China Mobile Wang Xiaochu becomes head of China Telecom. China Telecom’s deputy managing director Chang Xiaobing is now China Unicom’s president and – all importantly – its Communist Party secretary general. China Netcom’s Vice Chairman has left his position as Vice Chairman and heads to China Telecom. For the carriers the immediate implications appear limited. The reshuffle follows a pattern that is actually standard procedure in the Chinese bureaucracy. The Communist Party occasionally orchestrates personnel rotations amongst ministries, state-owned enterprises or provincial governments to emphasize the primacy of Party/State interests over individual goals (an implicit anti-corruption measure).
China’s anti-graft investigators are expected to launch a probe into the multibillion-dollar deals foreign telecom equipment makers have secured to supply the mainland’s vast telecom market. Lucent has turned over to mainland investigators an 800-page report into possible violations of a US anti-corruption law involving its China operations (first disclosed in April). The anti-corruption bureau of the Beijing Municipal People’s Procurate is translating the report and BDA has learned that investigators are now preparing to launch a comprehensive probe of the mainland’s telecom industry, which could further delay 3G licensing.
Corruption is rife in China’s telecom industry, with telecom officials and operators widely thought to receive huge kickbacks for approving purchases of equipment worth hundreds of millions of US dollars from foreign and domestic makers. The fall-out for vendors has yet to be seen, but with USD 25 billion in capex expected in 2004 the stakes are high.
Internet & Media In Q3 2004, Shanda (Nasdaq: SNDA) saw net revenues of RMB 353.3 million (USD 42.7 million), representing a 23.1% increase on Q2 2004. Shanda’s online game revenues saw steady growth to increase 19.1% quarter-on-quarter to RMB 341.2 million (USD 41.2 million) in Q3 2004. Total peak concurrent users for all its games in commercial service in Q3 2004 increased to 1.7 million from 1.6 million in Q2 2004. Shanda continued to expand its business through M&A. In Q3 2004, Shanda completed acquisitions of Bianfeng, a developer and operator of chess and board online games, and Qidian, an interactive online literature portal. In addition, in October 2004, Shanda completed the acquisition of Digital Red, a developer of games for mobile phones, and the purchase of a minority interest in Haofang, operator of a network PC game platform. To get in touch with BDA’s Internet/Media analysts, click here.
Fixed Line China Netcom fixed its Hong Kong and New York IPO prices on November 10th, raising USD 1.14 billion from the deal. The 1.046 billion shares in its Hong Kong deal were priced at HKD 8.48 versus a marketed range of HKD 7.88 to HKD 9.00. The ADR component of the deal was priced at USD 21.82. The company will trade on the NYSE as CNC. But its strategy for 3G remains a mystery to all, including the company, as all eyes are on regulators for hints of when licenses may be issued.
BDA China is an independent research firm based in China and focused on China’s TMT sectors. BDA has a 10 year track record of offering on-the-ground research and analysis to investors and industry participants. BDA offers fund managers access to regular email alerts and analysis, detailed sector reports and analyst access via conference call or inquiry hours. For more information on how to subscribe visit
