Tuesday, June 3, 2008

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China Telecom Chooses LTE Over CDMA As 4G Platform

Yet another of the world's largest CDMA carriers - China Telecom, which is in the process of buying China Unicom's CDMA business for $15.9 billion - says it's ditching CDMA in favor of Long Term Evolution (LTE).

The plan by China Telecom to eschew Ultra Mobile Broadband (UMB), the presumptive 4G upgrade path for CDMA, has gone almost unnoticed, what with all the furor about the massive restructuring of China's telecom industry into three competing mega-companies. What China Telecom is doing mirrors what's happened at a string of CDMA carriers around the world, most notably at Verizon Wireless (TelecomWeb news break, Nov. 29, 2007), resulting in what's emerging as a clean sweep for LTE in China.

The decision to eventually migrate to LTE was disclosed by China Telecom Chairman and CEO Wang Xiaochu as part of the formal announcement of China Telecom's purchase of China Unicom's CDMA business. Except for a final price that appears to be about 10-percent higher than expected, that deal is taking place as predicted. China Telecom, the country's largest fixed-line operator with 216 million customers, will buy China Unicom's CDMA network, currently serving 43 million customers. In addition, China Satellite Communications Corp. will be merged into China Telecom.

Also as expected, Wang said China Telecom initially will roll out its 3G offering of EV-DO Rev. A in key cities. China Telecom is in line to get a 3G license - as are the other two mega-companies being created in the revamp of China's telecom sector - once the dust settles. But, Wang predicted, "in two to three years' time, all networks, both GSM and CDMA, will migrate to LTE." (Indeed, in both China and the United States, that now appears to almost be true, with the lone exception of Sprint Nextel and its deal with Clearwire to launch a network using WiMAX technology, offering what many industry experts are now calling 3G or 3.5G speeds but marketing it as 4G.)

In addition to discussing future plans, also now outlined have been the technical and financial details of China Telecom's purchase of the Unicom CDMA assets. Here's how that will work: The subsidiary of China Telecom traded on the Hong Kong Stock Exchange will purchase the CDMA operating side of the house from Unicom's listed entity on the Hong Kong Stock Exchange for $6.3 billion. State-owned corporate parent China Telecom Group will purchase the CDMA infrastructure from Unicom New Horizon, a relatively unknown corporate subsidiary, for $9.6 billion. A rumor making the rounds also says the Chinese government may subsidize the deal because seeing it happen essentially is a matter of state policy. According to reports in the Chinese press, the country's Assets Supervision and Administration Commission of the State Council may provide between $4.3 billion and $7.2 billion to China Telecom to cover the cost.

Meanwhile, China Unicom and China Netcom (China's Number Two fixed-line provider with 108.7 million customers) also have announced details of their merger, under which Netcom will become a wholly owned subsidiary of Unicom. That deal is being done through a share swap. The terms, not previously outlined, are that Unicom will issue new shares for existing Netcom shares, with each China Netcom share on the Hong Kong Stock Exchange worth 1.508 Unicom shares. Holders of every Netcom American depository share (ADS) will be entitled to exchange them for 3.016 new Unicom ADS. The deal is being reported as having a nominal value of $56 billion.

As previously reported, China Unicom, which has 125.4 million GSM subscribers, is getting a 3G license and is expected to use WCDMA. It hasn't said anything yet about its 4G plans. China Mobile, the world's biggest wireless carrier with 392 million of China's 583.5 million mobile subscribers, also is expected to be issued a 3G license, requiring it to use China's home-grown TD-SCDMA. In the three-company-sector reorganization, China Mobile takes over China Tietong and its 41 million landline subscribers. Details of that deal had been the first of the three to be revealed (TelecomWeb news break, May 23).

China Mobile, while it hasn't "officially" committed to using LTE when it gets to the 4G stage, has left no doubt in the industry that's exactly what its going to do. The carrier, in addition to being a member of the LTE/SAE (systems architecture evolution) Trial Initiative, recently signed up to hold joint LTE trials with Vodafone and Verizon Wireless (TelecomWeb news break, Feb. 13). China Mobile is expected to use the time-division duplex (TDD) flavor of LTE (dubbed TD-LTE by the Chinese), as the "natural" upgrade to TD-SCDMA.

Most of the other carriers have yet to indicate whether they will opt for TD-SCDMA or for the frequency-division duplex (FDD) flavor of LTE. The main driver of a decision is the spectrum available for 4G in various countries. TD-SCDMA is preferred for unpaired spectrum, and expectations are that LTE handsets and other devices will support both kinds of LTE in order to enable roaming between systems using the two versions of the technology.