Chinese Telecom Industry To Go On 3G Shopping Spree: Report

The Chinese telecommunications industry is on the brink of a major transformation as carriers prepare to invest heavily in third-generation (3G) technologies in anticipation of Beijing's plan to issue 3G operating licenses, according to research by Heavy Reading.

According to the research, Chinese carriers have cut back on capital expenditures over the past two years to prepare for and inevitable 3G equipment shopping spree. The firm expects the decline in spending to level off next year, as carriers begin to build out their 3G networks. Chinese telecom capital expenditures are forecasted to grow by 5% in 2007 as the 3G buildout coincides with final preparations for the 2008 Beijing Olympics.

Western equipment vendors have been rushing to establish themselves in the Chinese market with that in mind. Heavy reading notes that Nokia is only the latest Western company to join forces with a Chinese 3G equipment vendor, joining the likes of Nortel Networks, Alcatel, Ericsson and Siemens.

"Western telecom equipment vendors are scrambling to line up local partners in China to have their 3G play in place as soon as licenses are awarded," Heavy Reading Managing Director Dennis Mendyk said in a statement. "China's delay in announcing the 3G winners has helped some Western vendors by buying them a little more time to pull deals together."

Although the date when the Chinese government will being issuing 3G licenses is uncertain, Heavy Reading says the technology is critical to the telecommunications industry in China. Despite growth in the subscriber base, revenues have been flat or falling, with a significant decline in the average revenue per user since 2003.