Qualcomm Inc (QCOM)

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China 3G licensing delay seen stifling TD-SCDMA growth - ABN AMRO
07.13.2005, 05:51 AM

http://www.forbes.com/markets/feeds/afx/2005/07/13/afx2135762.html

BEIJING (AFX) - ABN AMRO said any further delay in issuing third generation (3G) mobile technology licenses in China will stifle the development of TD-SCDMA, the country's homegrown 3G standard.

'If TD-SCDMA's maturation within six to 18 months is indeed the objective (as we believe it is), the best way to get there is to issue licenses as soon as possible. Additional delays at this point will only stifle growth,' the brokerage said in a research report.

This follows comments made earlier by Wang Zhiqin, an official at the Ministry of Information Industry Research Institute, that TD-SCDMA's maturity depended upon 'large scale adoption in an actual network.'

China is currently choosing between three 3G standards -- European-backed WCDMA, Qualcomm-developed CDMA2000, and TD-SCDMA, widely seen as the least mature technology. The government has been waiting for TD-SCDMA to mature before issuing 3G licenses.

But the standard must be taken out of the lab in order to enter the next stage of development, ABN AMRO said.

'TD-SCDMA is essentially a chicken-and-egg problem - the regulator has been waiting on licensing to see further maturation of the standard, yet without an official license issuance, the value chain will continue to drag its feet and development will have trouble accelerating,' it said.

ABN AMRO noted that WCDMA, which is now considered a mature technology, was plagued with technical issues following its deployment, and that no technology can mature until six to 12 months after its commercial launch.

The brokerage also said that TD-SCDMA technology has reached a level where the risks of complete failure or disappointment are minimal and that earlier licensing will benefit the technology as well as domestic vendors and the value chain.

In this environment, the brokerage remains positive on China's second-largest mobile operator, China Unicom Ltd, which will likely benefit from the industry restructuring expected to precede 3G licensing.

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