China Mobile plans to start merchandising for 3G and TD-SCDMA in March, and various 3G phones, network and equipment makers and service providers are likely to benefit directly.

According to China Mobile's schedule for TS-SCDMA construction, its provincial subsidiaries have to confirm and report on their main network equipment demands for headquarters.  The group's centralized merchandising is scheduled to start on March 6, with core equipment merchandising complete by May 31, and end terminal merchandising by October 31.  Network construction and optimization are also expected to be completed by October 31.

Equipment makers in Guangdong have conducted technical exchanges and first trials with Guangdong China Mobile.  Equipment makers emphasize their trial performances, which determine the contract and market value they can obtain form China Mobile.

Two cities in Guangdong Province, Shenzhen and Guangzhou, have been added to the new round of expanded TD-SCDMA trials conducted by China Mobile.  Since such trials are also being conducted in six other cities--Shanghai, Beijing, Shenyang, Tianjin, Xiamen, and Qinhuangdao, large scale equipment merchandising will also be executed on all respective provincial levels.

China Mobile will carry out centralized merchandising of equipment, as well as investments and management, while provincial telecommunications service providers will be responsible for practical execution on the local level, with provincial subsidiaries responsible for organizing local network construction.  Fixed assets formed by local efforts will belong to local subsidiaries.  Meanwhile, the construction and operation of the trial network will having auditing procedures separate from the existing network.

A corporate member in the TD-SCDMA Alliance said that China Mobile's expanded trial employs a completely commercialized operation.  Unlike in the past, equipment makers and end terminal providers do not have to send equipment over for free, and China Mobile now invests in merchandising.  Merchandising prices are not dominated by government direction, but result instead from direct negotiations between China Mobile and equipment makers.

China Mobile plans construction of 8602 TD-SCDMA outdoor network stations by October, 2007, and 3772 sets of indoor distribution systems in  eight cities, where city coverage will reach 95%.  

The source at TD-SCDMA Alliance said that each outdoor network station costs 500,000 Yuan (US$63,291) and indoor distributed systems cost 200,000 yuan (US$25,316) together with antenna and other network products; therefore China Mobile's total investment will be 15 billion Yuan (US$1.899 billion) or more.  And since this network trial is meant to prepare for 3G commercialization in order to provide 3G services during the upcoming Olympics, network construction will fulfill the requirements of a commercial network.

According to Liao Xiaobin, senior engineer at Guangzhou TeleStar Telecom Consultant Service Co Ltd, four camps have formed among mobile equipment makers, with each mainland maker backed by foreign enterprises: Datang Mobile-Alcatel, ZTE Communications-Ericsson, Huawei-Siemens and Postel-Nokia.  China Mobile's merchandising is likely to stimulate yet another wave of market restructuring.

When 3G formally kicks off, changes might occur in power relations and the market shares of various equipment makers.  ZTE's persistent input into TD-SCDMA is one notable investment; an internal source at ZTE said that a report on the 3G trial released by the TD-SCDMA Alliance shows that Datang and ZTE top the various equipment makers with excellent indexes in various other trials.

The latest TD-SCDMA report of the International Capital Corporation Limited (CICC)
points out that ZTE can obtain at least a 30% share in  TD-SCDMA network construction in the ten cities.  Its cooperation with China Mobile may also boost the sales of its GSM network products and equipments.

The TD-SCDMA Alliance said that Datang and ZTE are undoubtedly the two firms that can obtain the largest contracts from China Mobile.  Since Alcatel employs Datang's connection equipments, Datang may, as a result, enjoy larger contract volume than ZTE, with Huawei and Postel following close behind.  The cooperation between mainland and foreign mobile equipment makers will create a win-win situation for both parties.