Europe : A national TD-SCDMA network will be built in China eventually, but Chinese operators do have concerns about the technology. According to the ABI Research's Asia analyst Junmei He, the last TD-SCDMA field trial was not successful, but since the middle of 2004 the commercialization capability of TD-SCDMA has improved significantly.

"We expect production of TD-SCDMA equipment to start in mid-2005," She says, "chipsets in 3Q 2005, and handsets in 4Q 2005. 3G licenses should be issued in the third quarter of 2005."

Compared to a standalone TD-SCDMA network, a mixed WCDMA/TD-SCDMA network creates many problems for operators in establishing efficient business modes. Additionally, most domestic companies are focusing on developing TD-SCDMA standalone products, instead of mixed network products.

The TD-SCDMA network will first be established in urban areas, ABI Research believes, while the GSM network will complement TD-SCDMA for nationwide coverage.

If they choose TD-SCDMA, China Telecom and China Netcom will initially focus on signing more voice subscribers to the network, and they will have strong policy support from the Chinese government. These favorable policies will be more important in attracting subscribers than service quality, as was the case with PHS.

ABI Research's latest Asian study, "TD-SCDMA: The Chinese 3G Standard", analyzes the TD-SCDMA industry chain in depth, from the wireless operators and equipment vendors to handset and chipset vendors.

The determination of the Chinese government to simplify market competition makes it reasonable to discuss the possibility of a telecom market reconstruction achieved by splitting China Unicom, which carries both GSM and CDMA networks. Because the related parties are all listed companies, a split would be carried out in the capital markets. If that happens, China Telecom would probably purchase the GSM network and China Netcom would purchase the CDMA network. The 3G license would be delayed to 4Q 2005, given the time needed for reconstruction.