Thursday, February 23, 2006

ABI Research: Challenges Ahead for TD-SCDMA in China

After Michael Cai at Parks Associates posted on his personal blog about China's 3G efforts, ABI Research has new research on the China government setting TD-SCDMA as the national standard for the telecom industry. ABI Research predicts that "an independent TD-SCDMA network will be set up, complemented by a GSM network to ensure national coverage."

Junmei He at ABI Research said, "It is just a first step for TD-SCDMA even in China, the technology's 'hometown'. Due to the high population of PHS service users among low-end subscribers and the decreasing price of both GSM terminals and service prices, it will be challenging for TD-SCDMA to attract voice service subscribers. At the same time, it appears unlikely that TD-SCDMA can achieve quick success by offering high speed data services, because demand for such services will remain low in the short term. Also, strong competition from WCDMA and CDMA 2000 with their well-established subscriber bases could curtail adoption. As a result, TD-SCDMA operators – potentially including China Telecom and China Netcom – need to adopt a more flexible business model to compete with existing mobile operators."

Jake Saunders at ABI Research added, "In support of the national standard, the Chinese government will give strong policy support to help TD-SCDMA operators gain time and establish a price lead over other 3G technologies, but the stakes could not be higher. It is not inconceivable that we see a billion SIM card subscriptions in the market by 2015. Multiply that by a forecasted ARPU of about US$300 per annum, and you can understand the interest not just from domestic but also international players. Vodafone, Telefonica, Hutchison, Deutsche Telekom and Telstra, all have equity or strategic relationships in China."

ABI Research forecast that "GSM will continue to be the dominant technology in China over the next five to eight years. Meanwhile, the market position of CDMA EV-DO could be greatly challenged by strong competition from both WCDMA and TD-SCDMA."