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Challenging times for TD-SCDMA in China
Posted: 22-Feb-2006 [Source: ABI Research]

[TD-SCDMA expected to have uphill struggle gaining market share in China, reports ABI Research, as GSM is expected to be the dominant technology in China over the next five to eight years.]

Oyster Bay -- The Chinese mobile telephony market is one of the most dynamic and complicated in the world, and it will become considerably more complex in the next few years. At the end of January 2006, China's government set TD-SCDMA as the national standard for the telecom industry. ABI Research believes that an independent TD-SCDMA network will be set up, complemented by a GSM network to ensure national coverage.

"It is just a first step for TD-SCDMA even in China, the technology's 'hometown'," says Junmei He, ABI Research's Hong Kong-based industry analyst. "Due to the high population of PHS service users among low-end subscribers and the decreasing price of both GSM terminals and service prices, it will be challenging for TD-SCDMA to attract voice service subscribers. At the same time, it appears unlikely that TD-SCDMA can achieve quick success by offering high speed data services, because demand for such services will remain low in the short term. Also, strong competition from WCDMA and CDMA 2000 with their well-established subscriber bases could curtail adoption. As a result, TD-SCDMA operators - potentially including China Telecom and China Netcom - need to adopt a more flexible business model to compete with existing mobile operators."

Jake Saunders, ABI Research's Director of Global Forecasting, adds, "In support of the national standard, the Chinese government will give strong policy support to help TD-SCDMA operators gain time and establish a price lead over other 3G technologies, but the stakes could not be higher. It is not inconceivable that we see a billion SIM card subscriptions in the market by 2015. Multiply that by a forecasted ARPU of about US$300 per annum, and you can understand the interest not just from domestic but also international players. Vodafone, Telefonica, Hutchison, Deutsche Telekom and Telstra, all have equity or strategic relationships in China."

ABI Research does not expect that the establishment of a national 3G network will greatly change the existing mobile landscape. GSM will continue to be the dominant technology in China over the next five to eight years. Meanwhile, the market position of CDMA EV-DO could be greatly challenged by strong competition from both WCDMA and TD-SCDMA.

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