Equipment vendors cash in on China’s mobile boom

China’s booming mobile phone market is proving fertile ground for eager equipment vendors, as the country’s operators continue to expand their networks to accommodate new subscribers.

The ongoing boom in network expansion means lucrative equipment supply contracts for the likes of L.M. Ericsson Telephone Co., Motorola Inc. and Nokia Corp. Increasingly; however, the equipment is built and supplied by the vendors’ joint venture companies or partners in China.

Projected to have more than 70 million mobile phone users by the end of this year, China is already estimated to be the world’s second largest market in terms of users, behind only the U.S. China’s mobile user base, however, is expected to continue growing at a rapid pace due to the low overall penetration rate, estimated at only 5.5 per cent by the country’s Ministry of Information Industry.

To prepare for the expected wave of new subscribers, operators are expanding their networks.

On Tuesday, Motorola announced that it has won two orders, from units of China Mobile Communication Corp. in the provinces of Fujian and Sichuan. Valued at US$102 million, the orders call for Motorola to provide equipment for a new 1.8GHz GSM (Global System for Mobile Communications) network in Sichuan and for the expansion of an existing dual-band 900MHz/1.8GHz GSM network in Fujian, the Schaumburg, Illinois-based company said in a statement.

When completed in the third quarter of 2001, the Sichuan network will support more than 531,000 subscribers, while the expansion to the Fujian network, scheduled for completion in next year’s fourth quarter, will allow for 730,000 additional subscribers. Currently, there are a total of approximately 5.7 million mobile phone subscribers in the two provinces, Motorola said.

Both contracts were awarded to Motorola through China Eastern Communications Co. Ltd., one of its key licensing and joint venture partners in China.

Nokia, in turn, on Monday announced that it has won an equipment order valued at $40 million to expand Shanghai Mobile Communication Corp.’s 1.8GHz GSM network. The agreement was completed with Beijing Nokia Hangxing Telecommunications Systems Co. Ltd., one of Nokia’s equipment-making joint ventures in China, the Espoo, Finland-based company said in a statement.

Earlier this month, Stockholm-based Ericsson announced that it had received an order valued at more than $110 million to supply equipment for the expansion of Jiangsu Mobile Communication Corp.’s GSM network. Ericsson also will use one of its Chinese joint ventures, Nanjing Ericsson Panda Communications Ltd., to supply infrastructure equipment, software and system services, the company said in a statement.

To be sure, not all network contracts in China go to foreign suppliers or their local joint ventures. Homegrown equipment suppliers, including Huawei Technologies Co. Ltd. and ZTE Corp., both based in Shenzhen, have slowly but surely built up their competence in making wireless network infrastructure equipment.

At the Telecom Asia 2000 exhibition held in Hong Kong earlier in December, for example, officials at both Huawei and ZTE said that they are readying equipment for building third-generation (3G) wireless networks. Huawei officials said that their first 3G system, for networks based on W-CDMA (Wideband Code Division Multiple Access) technology, is scheduled to be rolled out in the first half of next year.

Ericsson, in Stockholm, can be reached at Huawei Technologies, in Shenzhen, China, is Motorola, in Schaumburg, Ill., is at Nokia, in Espoo, Finland, is at ZTE, in Shenzhen, China, is at