China PHS Market Update
- Key trends in PHS
- Infrastructure investment
- SMS interconnection
- 3G Update
Key Trends in PHS
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Strong infrastructure investment:
UTStarcom ended 2003 with a record backlog, and a number of new contracts have been announced in the first two months of 2004 as operators invest heavily in PHS networks.
Netcom is reported to have increased its PHS investment plan ahead of its Initial Public Offering set for later this year. |
| PHS
winning battle with alternative standards: Guangdong province is one
of the most diverse Wireless Local Loop (WLL) markets, being early-adopters
of PHS, CDMA 450 and CDMA 1900.
In a sign of PHSfs strong position over other technologies, non-PHS WLL networks
have either been dismantled or have had their growth restricted, and PHS networks
have been erected in their place. PHS was first introduced in April 2003 to Guangzhou.
Guangzhou had a subscriber base of more than 600,000 by the end of 2003 and was
growing at a rate of more than 50,000 per month. |
| PHS to be deployed in Shanghai: Shanghai Telecom has begun to dismantle its CDMA-based fixed wireless system in rural areas to make way for the launch of a new city-wide PHS service to be launched on May 17.
Shanghai is the last major city without a PHS service. |
| Beijing sets target for 2004: Beijing Communication (subsidiary of China Netcom) has set a subscription target of 1 million PHS users in Beijing by the end 2004.
Beijing Communication signed up 510,000 PHS users by the end of 2003, after its PHS service launched in Beijing in March, exceeding the reduced target of 500,000 users. |
Infrastructure Investment
China Telecom and Netcom continue to invest heavily in their PHS networks, and all signs are for a strong 2004.
UTStarcom finished 2003 with a record backlog of USD 1.06 billion up 75% from the year earlier. 80% of the backlog is wireless infrastructure or PHS equipment.
Other recently announced contracts for PHS not counted in UTStarcomfs backlog include:
| January 13: USD 200 million contract signed with China Telecom for PHS expansions in 12 provinces including Chongqing, Guangdong, Zhejiang, Jiangsu, and Sichuan. |
| February 4: USD 40 million contract with China Netcom for PHS deployments in Shandong. |
| February 10: USD 32 million contract for PHS deployments in 9 cities in Henan province. |
| February 19: USD 18.8 million contact for PHS deployments in Guizhou. |
The PHS business has also been strong at ZTE which posted strong results on February 6.
2003 sales totaled RMB 25.19 billion up 50% from the previous year.
Growth was driven in large part by PHS sales with 48% of total contract revenue coming from PHS equipment.
As Netcom prepares for its Initial Public Offering in New York and Hong Kong, expected later this year, the company is said to be increasing its investment in PHS.
After the Chinese New Year, the company reportedly made significant increases in its PHS investment plan for 2004.
SMS Interconnection
Improving mobile data services and offering SMS (Short Message Service) interconnection are a major industry focus in 2004.
UTStarcom has reported that they expect mobile data subscribers on its PHS networks will grow from 8 million at the end of 2003 to over 20 million by the end of 2004 as new SMS-enabled handsets are sold this year.
On the interconnection front, at the beginning of December, the MII (Ministry of Information Industry) issued a circular ordering operators to begin testing SMS interconnection between the mobile networks operated by China Mobile and Unicom and China Telecom and Netcom's PHS networks with a goal of formally launching service by March of 2004.
The fixed-line carriers have solved many of the technical hurdles that slowed progress on interconnection. Netcom completed testing on interconnection within its own PHS at the end of November and launched full PHS interconnection within its northern 10 provinces on December 23, 2003.
With the technical problems solved, China Telecom and Netcom have been pushing for the MII to step in and bring the mobile operators on board.
But in their battle with PHS, mobile operators are likely to delay opening up interconnection as long as possible, and the MIIfs deadline will not be met as a result.
Netcom Groupfs Vice President Leng Rongquan conceded that nationwide interconnection would take place at the end of June at the earliest in recent statements reported by the press.
In the meantime, Shanghai and Jiangsu province have been chosen as two testing grounds for PHS and mobile interconnection, with full interconnection expected to be completed sooner.
On December 23, China Netcom announced the creation of a new brand for its PHS mobile data services: "Ling Ji e Dong".
The brand will cover a range of services including PHS Internet access, multimedia email, icon and ring tone downloads, and location-based services.
The services will also include PHS SMS interconnection which is expected to be launched soon.
PHS mobile data tariffs undercut China Mobile. (SMS: RMB 0.08 per message on PHS vs. RMB 0.1 to 0.2 for China Mobile. PHS Internet dial-up vs. China Mobile WAP: RMB 0.09 per minute for PHS vs. RMB 0.15 per minute for China Mobile.)
3G Update
MTNet tests for 3G are now underway as China considers three alternative standards for 3G: CDMA 2000, W-CDMA, and homegrown standard TD-SCDMA.
Trials are set to be completed by September after which the results will be submitted to the government for review.
3G licenses are expected to be issued after the tests are completed, and most likely not until 2005 after the government has had time to review the trial results.
However, one wild card in 3G license timing remains Netcomfs Initial Public Offering. Some believe the company might be issued a license sooner to help raise the value of its Initial Public Offering.
