China's fixed-asset investment in telecoms is expected to continue decreasing this year, with some industry uncertainty stemming from possible restructuring and the introduction of 3G licensing.

 

Zhang Chunlin, vice-director of the General Planning Division of Ministry of Information Industry (MII), forecasts operators' spending in 2006 will be around 200 billion yuan (US$25 billion).

 

That represents a third consecutive year of decline, with 210 billion yuan (US$26.25 billion) spending in 2005, 213.65 billion yuan (US$26.7 billion) in 2004, and 221.5 billion yuan (US$27.69 billlion) in 2003.

 

China's major operators have become increasingly prudent in fixed-asset investment in the past several years, and the spending spree witnessed in 2001 has almost ended, said Zhang at a telecoms forum yesterday.

 

The senior government official said talk of restructuring of domestic telecoms operators and the licensing of the third generation (3G) mobile telephony will bring unpredictability to the fixed-asset investment.

 

Lu Qijun, vice-director of the New Industry Research Centre of Research Centre of the State-owned Asset Supervision and Administration Commission (SASAC), urged regulators to speed up the 3G licensing process.

 

Chinese regulators have yet to indicate when to award operators with the licences to build 3G networks.

 

Many people in the industry now expect the licensing to take place in 2006. The MII has promised operators will be able to offer 3G services during the Olympics Beijing 2008.

 

Lu said operators need the licences to warm up the markets.

 

"The kick-off of 3G network build-out will become the driving force in boosting China's national economy," he said.

 

The researcher estimated an investment of 100 million yuan (US$12.5 million) in the telecoms industry could bring a national income increase of 1.38 billion yuan (US$172.5 million) in ten years.

 

In 2004, the information and communications industry contributed 4.31 percent to China's GDP (gross domestic product).

 

The figure for last year is estimated to be about 5 percent.

 

The build-up of 3G networks could unleash big orders to equipment makers. Industry executives and experts estimate a nationwide 3G network could cost 200 billion yuan (US$25 billion).

 

China is widely expected to build at least three national 3G networks.

 

Li urged regulators to be prudent in restructuring the country's telecoms sector.

 

Many analysts believe China Unicom, which operates two different cellular networks, could be split or merged with other operators.

 

A recent report by Goldman Sachs Securities forecasts that Chinese telecoms industry will be restructured next year and the licensing will happen in the second half.

 

Lu urged regulators not to split any operator.

 

"It's already a common view that in order to avoid monopoly, regulators in developed countries do not force telecoms operators to be split," he said.

 

MII's Zhang also predicts the turnover of the telecoms sector in 2006 will increase by 25 percent year-on-year to reach 1450 billion yuan (US$181 billion).

 

He expects the number of fixed-line users to reach 380 million by the end of this year, adding 30 million new subscribers, compared to 350 million last year. The number of mobile phone subscribers is believed to reach 440 million this year.

 

(China Daily January 6, 2006)