Dec. 12 (Bloomberg) -- China said it will issue high-speed mobile-phone licenses as early as this month, which will trigger at least 200 billion yuan ($29 billion) of spending in 2009 as operators upgrade networks to offer faster services.
The estimated investments in third-generation networks and services will help stimulate economic growth, Li Yizhong, head of the Ministry of Industry and Information Technology, said in Beijing today. Three permits will be issued before the end of this year or in early 2009, Li said.
The nation¡¯s carriers including China Mobile Ltd. seek to use 3G technology for faster wireless services to lift revenue and weather slowing demand as China¡¯s economy weakens. Operators in the world¡¯s biggest phone market face increased competition after the rollout of 3G services, eroding the industry¡¯s profitability, according to Citigroup Inc.
¡°After the 3G services are launched, you will start to see China Mobile lose market share, while China Telecom and Unicom will gain market share,¡± said Michael Meng, a Hong Kong-based analyst at Citigroup. ¡°It will change the competitive landscape.¡±
China Mobile fell 7.1 percent to HK$76.50 at the 12:30 p.m. trading break in Hong Kong today, compared with a 6.9 percent drop for the city¡¯s Hang Seng Index. China Telecom Corp. shares lost 6 percent to HK$2.82, while China Unicom (Hong Kong) Ltd. slid 7.6 percent to HK$9.15.
Local, International Standards
China Mobile, the world¡¯s biggest carrier by market value, will receive a license to operate services based on TD-SCDMA technology, Li said today. The time division synchronous code division multiple access system was developed domestically.
China Unicom, the country¡¯s second-biggest wireless carrier, will get a license to offer services based on wideband CDMA, or W-CDMA, Li said. China Telecom will receive a CDMA2000 permit.
Awarding China Telecom and Unicom licenses based on the internationally developed standards will increase their competitiveness against China Mobile, Citigroup¡¯s Meng said.
Profits at China Telecom and Unicom are expected to fall 25 percent in 2009 as they increase spending on 3G, the analyst said. China Mobile¡¯s earnings growth will ease, he said.
Third-quarter profit at China Mobile rose 26 percent to 27.8 billion yuan, missing analysts¡¯ estimates, after call volume growth slowed, underscoring concern that subscriber demand was weakening. Still, the company earned more than double the total profit of China Telecom and Unicom in the first nine months.
Industry Reorganization
The government in May asked China Unicom to take over fixed- line carrier China Netcom Group Corp. after selling the smaller of its two mobile-phone units to China Telecom. The industry reorganization was aimed at increasing competition by allowing phone companies to offer both wireless and landline services.
Telecommunications revenue in China may rise 6 percent this year, slower than the 12 percent increase in 2007, as consumers rein in spending, Morgan Stanley analyst Yvonne Chow wrote in a Nov. 9 report.
China¡¯s economy expanded 9 percent in the third quarter, the slowest pace since 2003, as export demand and business investment weakened. Growth will ease to 6 percent in 2009, according to Goldman Sachs Group Inc.
To contact the reporters on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net; Lee Spears in Beijing at lspears2@bloomberg.net.