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Datang Telecom Probe Clouds 3G Market

A financial probe into Shanghai-listed Datang Telecom Technology Co Ltd, developer of China's patented 3G standard, has clouded the telecommunications sector and dragged its shares down by almost the 10-percent limit yesterday, China Business News reported.

Datang Telecom said yesterday it has received notification from the Beijing branch of the China Securities Regulatory Commission (CSRC) of a probe into its alleged disclosure of false information, the CBN report said.  Details of the charge were not specified.

On the news, shares of the company plunged by 9.61 percent and closed at 7.81 yuan (95.3 US cents).  Those of other listed companies involved in the 3G and telecom sector also plummeted.

Given the fact that Datang is the developer of China's only patented 3G technology, Time Division - Synchronous Code Division Multiple Access (TD-SCDMA), and that the country seems to prefer it as its CDMA standard, market analysts worry the probe will delay the telecom authority's already long-awaited issue of 3G business licenses.

"The licenses, expected to be issued early next year, may be affected by the probe and delayed," said an analyst with Shenyin & Wanguo Securities Co, as quoted by CBN.

Another analyst with Yinhe Securities Co echoed this worry, noting that Datang Telecom, as well as China, is at an important stage in respect of the 3G market.

A telecom operator in Romania has agreed to build a test TD-SCDMA network there, the first network of its kind overseas, with equipment supplied by domestic telecom equipment manufacturer ZTE Corp.  If the trial is successful, the company plans to build a network for commercial use, he said.

Despite such a breakthrough, Datang Telecom has long been plagued with financial concerns during its research and development phase, analysts pointed out.

Company data released at the end of October indicated losses of 19.5 million yuan in the first nine months.

It is pressured by both high stocks and low liquidity, as pointed out by a Merrill Lynch analyst.

It is not the first time for Datang Telecom to undergo a probe by the securities authority. On August 19, 2003, CSRC started a probe on its alleged involvement in a scandal affecting another listed company.

(Shanghai Daily November 11, 2005)

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