French telecoms equipment maker Alcatel is nearing a cooperation deal with a Chinese peer involving the construction of third-generation (3G) mobile phone networks using a Chinese technology standard, a senior executive said.

Alcatel's position in China has also been bolstered by gains in market share, Christian Reinaudo, the company's head of Asia-Pacific operations, said last week.

"We're in very serious talks with local Chinese firms to do something together," Reinaudo said at the Reuters Asia Technology Summit.

He said he was convinced the Chinese Government would mandate that one of the country's wireless operators use TD-SCDMA, a home-grown version of 3G technology that promises to bring video calling and high-speed Web connections to mobile phones.

"I believe it will be (set as a standard in China)," he said.

TD-SCDMA will probably be used in parallel with two other high-speed cellular network technologies: WCDMA, which is already in use in Europe and Japan, and CDMA2000 1x, used in North America.

A Motorola executive said earlier at the Reuters summit that his company will also be ready if the Chinese Government decides to go with TD-SCDMA.

But Reinaudo said he regards Germany's Siemens and China's Datang as more serious rivals in the technology.

China's Huawei is also developing TD-SCDMA technology.

Reinaudo declined to give details on a possible partnership. He said details were still being hammered out.

China has not yet awarded any 3G licenses, although WCDMA and CDMA2000 1x are ready for commercial use, in part because it wants to give TD-SCDMA time to catch up, Reinaudo said.

"The (TD-SCDMA) standard is behind 3G. It's one of the reasons it (the licensing process) has been delayed," he said.

Reinaudo said he expects by November the government will indicate the timing for 3G licence awards, after the completion of another round of trials.

Alcatel has experience in alliances with local vendors to share heavy research and development costs for cellular networks, including collaboration with Japan's Fujitsu in WCDMA.

Reinaudo said in China, the world's biggest mobile communications market with 300 million subscribers, Alcatel is gaining market share in current, second-generation cellular networks, known as GSM and CDMA.

"Last year, we had 12 to 13 percent (market share). I believe it could be close to, if not more than, 15 percent this year. We penetrated provinces where we weren't before," he said.

He expects the Chinese market for mobile network equipment to be more or less stable next year. That sounded an upbeat note compared with many financial analysts, who have forecasted a drop of more than 10 percent.

"And Alcatel will do better than the market," he said.

The company, the world's third-largest supplier of telecoms infrastructure, said it is on track to meet its 30-per-cent growth target for its activities in China, and said it will expand its research and development operations in the country next year.

"We're pushing to low-cost markets. China, because of its size and low cost, is a privileged place," Reinaudo said.

Alcatel is the world's biggest producer of broadband Internet equipment for fixed-line networks, with close to a 40-per-cent share of the global market.

But the firm is fighting an increasingly fierce battle with rivals, such as Huawei.

After redesigning its equipment and tapping China's low-cost base for more of its manufacturing, Alcatel's DSL broadband equipment in China is now as inexpensive as that of its rivals, Reinaudo said.

The company, he added, will not be drawn into commodity-grade business in fixed-line networks, and is moving into high-value services that will allow telecoms operators to offer television and video over their broadband connections.

(China Business Weekly September 29, 2004)