Massive spending on 3G networks by China's three mobile carriers will cause spending on wireless infrastructure equipment in the nation to surge by 27.7% to reach US$6.3 billion in 2009, marking a peak for expenditures, according to iSuppli.
"After a strong increase in purchases of wireless communications gear in China in 2009, 2010 will bring a 2.4% decline to US$6.1 billion as China Telecom completes purchasing for its massive rollout of 3G handset base station transceivers," said Will Kong, analyst for China Research at iSuppli. "Revenues will continue to decline in the following years as the carriers move beyond the initial deployment stage of their 3G services."
The carriers' massive investment in infrastructure will result in the number of 3G subscribers in the nation rising to more than 100 million in 2013, up from 338,000 in 2008.
Phase one for 3G
The nation's three mobile carriers – China Telecom, China Unicom and China Mobile – completed the first phase of their 3G network deployments before August of 2009.
The proliferation of CDMA-based 3G services is progressing rapidly. China Telecom's CDMA 2000 3G network now covers 342 cities and is expected to expand to 500 by the end of 2009, while China Unicom has conducted two phases of WCDMA network deployment to cover 285 cities.
In comparison, the process of commercialization of the alternative TD-SCDMA 3G technology is slower than expected. China Mobile's TD-SCDMA network covered just 38 cities before August. However, an additional deployment is set to expand the service to a total of 238 cities by the end of 2009. In terms of network deployment, China Telecom is the fastest mover in the 3G area, and is expected to initiate a price war to attract more subscribers.
China Telecom
China Telecom rapidly deployed its 3G network in the first half of 2009, offering consumers a package of mobile and wireline services to boost interest. As a result, the carrier's mobile subscribers increased by 18.9 million from January to the end of September to reach a total of 46.8 million.
By September, iSuppli found China Telecom had deployed about 480,000 transceivers, with network expansions expected to continue in the fourth quarter. China Telecom will kick off new bidding in October, which will involve an additional 150,000 transceivers. After the new deployment, China Telecom will have more than one million transceivers in the country. iSuppli believes the company's network capital spending will decrease in 2010.
iSuppli forecasts China Telecom's mobile subscribers will exceed 50 million at the end of 2009, up a total of 23 million from 2008.
China Unicom
China Unicom finished the first phase of deployment for its WCDMA network in September 2009, using 71,000 base stations nationwide and covering 285 cities. iSuppli expects China Unicom will deploy another 30,000 base stations in 334 cities before January 2010, and that the carrier will have national WCDMA networks covering 384 cities in the country by the end of 2010.
iSuppli also forecasts that China Unicom will spend more than US$900 million on wireless infrastructure equipment in 2009 and then maintain capital expenditures at the same level in 2010. China Unicom continues to upgrade its GSM network to EDGE, as a complement to its 3G network.
China Unicom will leverage the advantage of WCDMA to acquire more subscribers during the next few years. China Unicom has just started providing 3G service. iSuppli believes that as the company increases the coverage and variety of WCDMA services, its market share will continue to grow.
By the end of September, China Unicom's mobile subscribers increased by 9.4 million to reach a total of 142.8 million. iSuppli forecasts the company's mobile subscribers will exceed 200 million in 2013, with a CAGR of 8.8%.
China Mobile
China Mobile finished building 44,000 TD-SCDMA base stations at the end of June and has begun its third TD-SCDMA tender. iSuppli expects China Mobile will expand TD-SCDMA network coverage to 238 cities during its third-round tender, involving an additional 60,000 base stations and 450,000 transceivers.
China Mobile's 3G network deployment speed is much slower compared with its competitors in China. This is surprising, given the company's reputation for capable execution. This time, company efforts have been stymied by a lack of handset terminals, unstable infrastructure equipment and the company's hope to deploy TDD-LTE in the coming years.
Based on this strategy, China Mobile will continue to deploy GSM networks throughout the country. iSuppli found China Mobile deployed 1.2 million GSM transceivers in 2008, and will deploy another one million in 2009. Although China Mobile announced that it will deploy a TD-LTE pre-commercial network in Shanghai in 2010, iSuppli still does not believe TD-LTE will enter large-scale deployment before 2011. Because of this, China Mobile will lose market share in the data service segment to its competitors, iSuppli believes.
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