China Mobile To Spend $7 Billion on 3G
By Carlo Longino, Fri Aug 20 22:45:00 GMT 2004

The giant carrier has confirmed an analyst report saying it expects to spend more than $7 billion in the next two years on 3G networks.

China Mobile reported its first-half earnings earlier this week, with profits up about 8% as subscribers increased by nearly a quarter. It earned 18.83 billion yuan (about $2.3 billion) on revenues of revenues of 86.42 billion yuan ($10.4 billion) in the first half of the year, and now has 159 million subscribers, more than any other carrier in the world.

But the company confirmed a report that it will spend 60 billion yuan ($7.25 billion) on 3G over the next two years, even though it doesn't yet have a 3G license and the Chinese goverment hasn't decided which 3G technology it will mandate. China Mobile operates a GSM network (unlike its smaller rival China Unicom, which operates both GSM and CDMA), so it's certainly hoping the government backs WCDMA. The carrier said it will exceed its projected 2004 capital expenditure of $5.8 billion by 15%, and may exceed its 2005 projected capex of $4.3 billion.

The confirmation would indicate that the Chinese Ministry of Information Ministry should soon award 3G licenses, and also appears to indicate that WCDMA will be selected alongside TD-SCDMA, since both can be set up over a GSM core network. Forcing a shift to CDMA2000 would put China Mobile at a distinct disadvantage, as well as close off the country's GSM legacy networks from future evolution.

It also underlines the importance of China to the mobile infrastructure equipment market. A report last week said a total of $9 billion was spent on network gear in the second quarter, so China Mobile's plans to spend $7.5 billion -- and it appears that's only on 3G, not on 2G or 2.5G equipment -- could provide a significant boost.

The network infrastructure vendors are getting understandably anxious for the government to move the situation forward, but China Mobile looks to be comfortable waiting a bit longer. Its chairman, Wang Xiaochu, said, "Many European companies will carry out trials on 3G in the second half year, and this should help us determine our future direction on 3G," perhaps revealing the company is more concerned about being the right mover, rather than the first mover.