China Mobile, China Unicom Buoyed by New Chinese 3G Licenses

(MoneyWatch)  For some time, China has been pushing to create its own telecommunications standards, for a number of reasonably obvious reasons. But now the country has decided to award a number of 3G mobile licenses, based not only on the Beijing-created TD-SCDMA standard, but on CDMA and WCDMA as well. From a purely practical consideration, this is a story so big that it will be hard to find something of greater relevance to the industry for some time.

Stocks in some Chinese telecom carriers -- such as China Mobile and China Unicom -- leapt at the news. There are two ways to count the reasons. One is by population. With roughly 1.3 billion people, it's a market that no company thinks it can afford to ignore. There are an estimated 600 million cell phone users, and a quarter of them could move to 3G by 2010.

The other number, which is related, is the estimated $41 billion in equipment that the country will have to buy. At a time when many companies are pulling back earnings estimates and slashing staff and costs to prepare for what they think will be a pretty bad time, this is a welcome boost, particularly as allowance for existing 3G technologies mean that the companies can potentially use or adapt products that they already have.

Ah, but who will get all that money? As elsewhere in the world, the economy in China has been slowing. The government is bound to want to stimulate local manufacturing as much as possible if it cannot count on exports to fuel growth.

Foreigners are likely to get less than half of China's 3G orders, said Duncan Clark, chairman of BDA China Ltd. , a Beijing consulting firm."It's basically an intensely political process," Clark said.

And a number of companies have shown in the past what they're willing to do to get their products accepted, whether it is Apple killing GPS in iPhones for Egypt, or companies like Google being criticized for censoring search results in China to comply with government requests. Look at the numbers, and you realize that resistance will be difficult, indeed.

iPhone image via Flickr user miss Karen, CC2.