China’s Efforts To Rapidly Build Its 4G Network Is A Boon For Struggling Telecom Gear Makers

The Chinese government will reportedly begin issuing 4G licenses (link via Google Translate) by the end of this year or early 2014 at the latest, following news that China Mobile is set to take construction bids for its 4G network as soon as this month. The country’s efforts to build out its TD-LTE network as quickly as possible is a potentially lucrative opportunity for telecom equipment makers, which have been hurt by the sluggish global economy.

In addition to domestic operators like Huawei and ZTE, foreign telecom equipment and chip makers hoping to peg their growth to the expansion of China Mobile’s 4G network include Ericsson, Nokia Siemens, Alcatel-Lucent, Qualcomm and Samsung Electronics.

China Mobile¬†said last month that it will spend 190.2 billion yuan ($30.1 billion)¬†on its networks this year, with about a quarter of that amount earmarked for TD-LTE technology. The company, the world’s biggest telecom operator by subscriber number, is expected to build 200,000 TD-LTE bases, in addition to 110,000 3G bases. China Mobile’s 4G subscriber base is forecast to reach 228.8 million in 2017, representing 52 percent of China’s 439.9 million total 4G users, according to estimates by IHS iSuppli.))

Ericsson, the world’s largest 4G vendor, is especially eager to grab a bigger slice of China’s 4G market. “We are not satisfied with the results Ericsson achieved in China Mobile’s first-round 4G bidding last year,” said Mats H. Olsson, senior VP of Ericsson Asia-Pacific, during February’s Mobile World Congress. “In the past Ericsson paid a lot of attention to countries including the United States, Japan and South Korea and mainly focused on the deployment of FDD-LTE networks. Now we have turned our sights on China and TD-LTE technology.”

Domestic telecom operators ZTE and Huawei are expected to land the most 4G network contracts with China’s three major carriers (China Mobile, China Unicom, China Telecom), however, because they enjoy backing from the Chinese government. Securing contracts is especially important for ZTE because its performance has been lagging behind Huawei.

It is still unclear whether China Mobile and China Telecom will operate TD-LTE networks together or separately, as the rival companies would prefer. China’s third major telecom operator, China Unicom, wants to hold on to 3G TD-SCDMA as long as possible because it has yet to recoup its 100 billion yuan ($16.3 billion) investment in the slower speed network, which it began building in 2007. TD-LTE’s predecessor TD-SCDMA was originally developed to become a global 3G standard, but its use was ultimately limited to China.