05:00 06.05.2006 | All news from "Tech News and Articles"
Heavy Demand Helps Cellular Carrier Ring Up Big Sales (Investor's Business Daily)
Almost 400 million Chinese subscribe to wireless phone services -- double the number of subscribers in the U.S.
The figure in China is expected to pass 617 million in five years.
Three service providers rule the market. Each is a former piece of China's nationally owned telephone operator, and each is still 70% owned by the Chinese government. The largest is China Mobile (NYSE: - ).
China Mobile was spun off in 2001 by China Telecom (NYSE: - ), the country's fixed-line communications provider. It didn't take long for the offspring to pass its parent. Last year China Mobile logged $29.7 billion in revenue compared with $20.7 billion at China Telecom.
On April 27 China Mobile posted $8.1 billion in first-quarter revenue, up 22% from the prior year. Earnings gained 32% to 45 cents a share.
Analysts polled by First Call expect China Mobile to grow annual earnings 6% this year and next year.
The company's recent success is due in large part to the rapid spread of wireless communications in the country. When China Mobile was launched, two-thirds of China's 1.3 billion citizens lived in rural areas. Fewer than 15% had telephones of any kind.
But incomes were rising, and tens of millions were migrating into cities for jobs. Growth in China's wireless network outpaced growth of its wire-based infrastructure.
China Mobile added more than 21 million new subscribers in the first quarter. The company controls 66% of the market, says Gartner analyst Sandy Shen.
"Other carriers are either too small to compete or only have fixed-line businesses," Shen wrote in an e-mail exchange.
A wave of new rivals is likely as the country moves into third-generation, or 3G, wireless technology.
Third-generation protocols can take a number of forms. Each allows high-speed data exchange, which opens the door to various advanced applications.
Various 3G protocols are already used in other countries, but China has delayed licensing while government officials and engineers work to create their own national standard.
Debate over the new standard includes how many licenses will be issued, when they'll issued and who'll get them. One concern is that Chinese officials will favor the home-grown standard, labeled TD-SCDMA, over competing, foreign standards such as WCDMA.
China Mobile execs, who could not be reached for comment, have expressed preference for WCDMA as a logical progression from its current wireless protocol, Shen says.
An April 11 release from the U.S. trade representative's office said Chinese officials had maintained a pledge to issue licenses "for all 3G standards in a technologically neutral manner that does not advantage one standard over others."
That didn't slow speculation that regulators will require some degree of adoption of the national protocol.
"The 3G picture is still very unclear in terms of licensing time frame and the type and number of licenses to be issued," Shen said.
Whatever the final decision, the change -- like most everything else in China -- promises to be massive. Shen estimates $10 billion in spending on 3G equipment through 2010.
The government's handling of licenses and technology could determine relative strength among the country's telecom players.
"It's the elephant in the room," Duncan Clark, managing director of industry researcher BDA China, wrote in an e-mail exchange.
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