China's telecommunications carriers are expected to spend 18 percent more year on year in 2007 not only on building the next-generation network but will also upgrade the existing networks, Analysys International said in a report Monday.

 

China Mobile, China Unicom, China Telecom and China Netcom are likely to spend a total of 245.64 billion yuan (US$31.90 billion) on capital expenditure this year, a jump of 9.7 percent year on year, said Analysys, a Beijing-based consulting firm.

 

 "It is the first surge in CAPEX spending in the past three years, with China Mobile likely to spend 20 billion yuan on the TD-SCDMA (3G technology)," Analysys said in the report. "The annual CAPEX was around 200 billion yuan from 2004 to 2006."

 

China Mobile has invested about 25 billion yuan to set up third generation, the so-called 3G, networks in several cities including Beijing and Shanghai, based on the home-grown time division-synchronous code division multiple access technology.

 

China Telecom and China Netcom have also started building networks in Baoding in Hebei Province and Qingdao in Shandong Province.

 

But the operators are not likely to invest the major bulk of their funds into 3G which can't give them a huge income in the short term, industry insiders said.

 

China Mobile, which will invest 80 billion yuan to 90 billion yuan in 2007, will continue to upgrade its 2G networks to provide data services and expand its networks in rural areas, where handset penetration rate is less than 10 percent, versus the more than 80 percent in major cities like Shanghai and Beijing, said Chen Haofei, the general secretary of the TD-SCDMA Forum.

 

"The 2G and 3G networks will co-exist for a long period and it is a wise way for carriers to prepare enough capital for the coming 3G competition," Chen added.

 

China Telecom will invest more on broadband and data services, according to Analysys.

 

The telecom carrier's non-voice business accounted for 29 percent of the company's overall sales in 2006, a gain of 5 percentage points. Internet-related revenue, such as Internet protocol TV and online video services, jumped 32.3 percent to 23.63 billion yuan. Broadband income rose 41.2 percent to 14.13 billion yuan.

 

"We realize the irreversible trend of the mobile phone business and the increasingly intense competition from the telecom industry," Wang Xiaochu, China Telecom's chairman, said previously.

 

(China Daily April 17, 2007)