It's China to the Rescue, Again
By
Dave Mock
January 12, 2009
|
Late last year, as investors fretted over the spiraling economy, the Chinese government stepped in to change the world when it announced a massive infrastructure investment plan that aims to keep the populous country growing. Suppliers of building materials and a whole range of commodities are expected to benefit by continued consumption in China as the $586 billion is doled out over the next two years.
Then, as 2008 came to a close, China stepped up again to dangle more billion dollar carrots to companies around the world -- though this time in a less direct way. Capping a long-awaited decision that forced a new level of patience in the industry, the Chinese telecommunications regulatory body finally issued permits for its three main telecom carriers to provide more advanced, high-speed wireless services. The new offerings are expected to spur $41 billion in equipment orders to build out new networks.
Every major telecom equipment and technology provider in the world -- from Alcatel-Lucent to Motorola (NYSE: MOT) to Qualcomm (Nasdaq: QCOM) -- has been waiting for China to join the rest of the world with advanced wireless services. But the Chinese Ministry of Industry and Information Technology (MIIT) took its time and elected to first push through a massive reorganization of the top players in the industry to bring more competition for services.
Now, China Mobile (NYSE: CHL), China Unicom (NYSE: CHU), and China Telecom (NYSE: CHA) will scramble to get networks and services up and running. Each player will be using a slightly different network technology, with most seasoned competitor China Mobile being given the edict to build out a "homegrown" next-generation wireless technology that so far only China has embraced.
Over the next few months, investors will find out whether the lion's share of the infrastructure build-out will be awarded to international players like Nokia (NYSE: NOK), Ericsson, or Nortel (NYSE: NT) or instead with rising domestic companies such as ZTE or Huawei. It is widely known that China's interest lies in developing its domestic industry, but even throwing minor scraps of business to outside firms can mean billions in new revenue.
Regardless of where dollars specifically fall in the build-out, the move heralds a new wave of growth in the global telecom market, particularly if the Chinese economy can weather the current glut and keep its growing middle class chugging along.
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