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  China's Mobile Communications Equipment Revenues Hit 20.4 Billion Yuan In 1H08
September 25, 2008

By the end of June 2008, China's mobile phone users exceeded 600 million. Telecom operator China Mobile alone grew 9.1 million new subscribers each month. China's mobile communications industry continues its rapid development.

In 1H 2008, China's mobile communications equipment revenues reached 20.37 billion Yuan. CCID Consulting expects GSM equipment purchases alone to exceed 10 billion Yuan by the end of 2008. China Mobile continues its large investments in its GSM network, while GSM network deployment has been China Unicom's key focus. China Telecom plans on expenditures of 10 billion Yuan on CDMA equipment.

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Source: CCID Consulting, July 2008

China's domestic 3G networks pushes forward.

China Mobile continues its TD-SCDMA trials. By the end of June 2008, its TD-SCDMA subscribers numbered 52,000, while its commercial users exceeded 8,000.

However, TD-SCDMA still has its challenges. 3G is high-end and expensive. Existing networks are fragmented and could not support its high-end users with seamless and consistent coverage. Loss of TD-SCDMA signals will automatically revert to GSM, which does not provide users the needed service levels.

In 2H08, China Mobile will initiate its second round of equipment bids. Relative to its first round, this round will focus more on construction rather than trials. CCID expects spending to reach 10 billion Yuan in 2H08.

China's restructured telecom operators jockey for position; network equipment vendors benefit.

China's telecom restructuring have left the newly reorganized operators with the following mobile communications base station snapshot: China Mobile's GSM base stations exceed 300,000; China Unicom's GSM base stations number 40,000, while China Telecom has 40,000 CDMA base stations.

As China Mobile is expected to increase its network investment, it will serve to spur a new round of equipment purchases by the other telecom operators, as all operators will focus on competitively building out their own mobile communications services.

Given that China Mobile far outpaces China Unicom in terms of GSM base stations (as one indicator), China Unicom will regardless focus in building its G- networks. China Unicom may also opt to adopt more mature WCDMA to develop its 3G services.

Excluding CDMA, China Telecom is at a disadvantage in terms of mobile network resources and subscribers. CCID Consulting expects China Telecom to invest heavily into their CDMA networks in the next two to three years to support anticipated subscriber and income growth. Moreover, CCID Consulting expects CDMA subscriber growth to be at 25% CAGR.

Equipment vendor rankings remains at status quo in 1H08.

Vendors still have narrow to negative profit margins on equipment itself, as telecom operators' average equipment spending ranges between 22K to 23K Yuan. However, telecom operators pay additional fees on integration and service. For GSM equipment, Ericsson, Huawei, Nokia Siemens and Alcatel-Lucent are the leaders, taking a combined 80% in market share. For CDMA, ZTE leads, followed closely by Alcatel-Lucent and Huawei.

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Unless otherwise specified, all information provided is sourced from CCID Consulting.


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