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  China's Telecom Restructuring Opens More Definitive Window For UPS Vendors Title
July 23, 2008

On May 24, 3008, China's National Development and Reform Commission (NDRC), Ministry of Industry and Information Technology, and the Ministry of Finance jointly issued the "Announcement on Deepening the Reform of the Structure of the Telecommunications Sector."

The principal goals of this announcement is further reformation of China's telecom sector, which are to support the formation of three telecom competitors where each has nationwide network resources, comparable strength and scale, and full services capabilities with enhanced competitiveness. Another goal is to grant 3G licenses to these competitors.

More specifically, the impact on existing telecom companies are as follows:

  • China Telecom will acquire China Unicom's CDMA network and China Satcom's basic telecom business
  • China Unicom and China Netcom will merge
  • China Mobile acquires China Railway Communication

The three resultant entities will be "new" China Telecom, China Unicom, and China Mobile.


Source: CCID Consulting, May 2008

The restructuring provides a clearer pathway towards 3G, as each competitor will be supporting a form of 3G, and hence, positioned to petition and receive 3G licenses.

China's UPS market a big beneficiary.

Such telecom restructuring will bring more opportunities to UPS manufacturers, as these larger telecom entities will be making large-scale investments in 3G communications equipment. Telecom is already a strategic, targeted industry for UPS vendors.

"New" China Mobile will execute its stage II TD construction with 40,000 base stations, and CCID Consulting forecasts China Mobile will set up an additional 150,000 base stations from 2009 to 2011. Combined, China Mobile's TD-CDMA base stations will reach 200,000 with a total investment reaching 90 billion Yuan.

Assuming "new" China Telecom and China Unicom will acquire their 3G CDMA 2000 and WCDMA license respectively, their number of 3G base stations will increase by 150,000 during the period of 2008 to 2012.

Taking these factors into account, investment for China's 3G network construction will peak within the next five years. And, in 3G base station construction, UPS will be a key component.

CCID Consulting data shows that, in 2007, China's UPS revenues in telecom reached 750 million Yuan, which was 26.6% of the total UPS revenues. Telecom was also the largest industry sector, with a growth rate approaching 8%.

UPS by Industry

2007 Revenue Share (%)

Telecom

26.6%

Financial Services

24.8%

Government

11.6%

Manufacturing

9.9%

Postal Service

4.9%

Education

4.5%

Transportation

4.3%

Others

13.4%

Total

100%

Source: CCID Consulting, May 2008

CCID Consulting expects China's new telecom entities to develop more definitive 3G development plans upon this restructuring announcement. These plans, in turn, will drive telecom equipment investment. UPS vendors (and telecom equipment vendors) should be prepared to capitalize on this surge of telecom investment. Larger UPS vendors would benefit by providing a more targeted, solutions approach to this new 3G environment.

For more information

Please contact us for these and other China-related data, information and products.

Unless otherwise specified, all information provided is sourced from CCID Consulting.

 
         
         
     

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