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3G offers chance to rebuild

By Wang Xing (China Daily US Edition)
Updated: 2009-03-04 17:10

China's 3G licensing represents a great opportunity for Alcatel-Lucent, the French telecom vendor, to reboot in China.

Alcatel-Lucent Shanghai Bell, Alcatel-Lucent's flagship company in China, was the first foreign-invested joint venture in the Chinese telecommunications industry, and has long been suffering from the side-effects of mergers and acquisitions by its foreign shareholders.

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But the company now seems to have streamlined operations and may be ready to get in on China’s upcoming 3G-network construction.

"We have the potential to become the No 1 in China, but now we are only among the top three," said Olivia Qiu, president of Alcatel-Lucent Shanghai Bell. "Our goal is to become the No 2 operator in China’s telecom equipment industry in the next two to three years."

From 2009 to 2011 China's three newly licensed major telecom companies will invest about $41 billion building their 3G infrastructures, with billions of dollars of additional investment expected to flow into applications and terminals/handsets, according to China’s Ministry of Industry and Information Technology.

It presents a huge opportunity for foreign equipment manufacturers, which have seen their business in mature markets such as the United States and Europe hurt by the financial crisis.

But analysts are predicting the rise of Chinese equipment manufacturer such Huawei Technologies and ZTE, which have a lower product prices and faster market response, may shove foreign telecom equipment companies out of their dominating position in China’s 3G era.

According to Beijing-based research firm BDA China, domestic equipment suppliers will get most of the new business and foreign companies' total share in China's upcoming telecom investments will be less than 50 percent.

But BDA said Alcatel-Lucent could get a 20 percent share of China Telecom's investment and a healthy share of China Unicom's. Alcatel-Lucent Shanghai Bell is also likely to win a large share of China Mobile’s construction of TD-SCDMA, which few other foreign companies have tried to grab, due to its partnership with Datang Group, the major domestic supplier of TD-SCDMA technologies and products.

Qiu said Alcatel-Lucent Shanghai Bell does not have any problems competing with domestic players. "Some of our competitors may have a more flexibility in their corporate financial activities since they are not listed companies," she said. "But we also have an advantages in our streamlined operations."

Alcatel-Lucent Shanghai Bell has about 15,000 employees in China, with over 6,000 doing research and development. Last year Chinese operations accounted for 15 percent of Alcatel-Lucent's global revenue and its Chinese R&D team managed about 30 percent of the company's global research workload.

Alcatel-Lucent Shanghai Bell announced on Feb 18 it would change its Chinese company name to Shanghai Bell as part of its restructuring, abandoning a name that a series of company mergers and acquisitions made long and unwieldy.

Qiu said Alcatel-Lucent will soon transfer more of its R&D and manufacturing to China and Alcatel-Lucent Shanghai Bell will become prominent in China's telecom market.