U.S. Bancorp Piper Jaffray Managing Director and Senior Wireless
Communications and Mobile Computing Analyst Samuel S. May, delivered a
detailed overview of the trends impacting the wireless equipment build-out in
China. May’s research team recently returned from an extended stay in Asia,
where they sought to uncover the major issues impacting the development of
wireless communications in the People’s Republic of China.
May estimates that worldwide wireless subscribers will grow from roughly
730 million as of year-end 2000 to 965 million as of year-end 2001. Of this
growth, May believes that slightly more than 40 percent will come from Asia
Pacific, which he estimates should account for more than 327.4 million
subscribers by year-end 2001.
May believes that the wireless equipment build-out in China will explode
over the next five years and points to three key drivers fueling the demand
for the significant infrastructure build-out:
1. The Asia Pacific region should represent nearly 34 percent of the
world’s wireless service subscriber base, or 403 million subscribers,
by year-end 2002, representing a projected 23.1 percent year-over-year
growth rate in 2002.
2. The Ministry of Information Industries (MII), China’s communications
regulatory body, unveiled a five-year plan for China to spend
$151.2 billion to expand and improve its telecom infrastructure by
2005. The plan calls for an increase in fixed-line capacity to support
220 million to 260 million fixed-line users, and for an increase in
mobile capacity to support between 260 million and 290 million mobile
3. China’s pending approval to enter the World Trade Organization, and the
recent successful bid to host the 2008 Summer Olympics in Beijing, will
provide additional catalysts to fuel infrastructure spending in the
next several years.
In addition, May believes that China will also become a meaningful
innovator in the development of wireless technology.
“In our view, China Mobile’s strong base of GSM users, juxtaposed with
China Unicom’s up-and-coming Code Division Multiple Access (CDMA) IS-95
network and China Telecom’s Personal Handyphone Set (PHS) wireless local loop
network, should provide an excellent testing ground for the technical and
economic merits of competing 2G and 2.5G wireless technologies,” said May.
“On the eve of the country’s entry into the World Trade Organization, the
ability of foreign vendors such as Motorola (#), Nokia (#), Ericsson (#), and
QUALCOMM (#) to invest in local ventures in China presents obvious
opportunity, as well as some risk. We believe strong domestic partnerships
with local suppliers and manufacturers will be key in establishing
distribution channels and political capital in China-two critical tools
necessary to capitalize on the world’s largest telecommunications
infrastructure build-out to date.”
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