Nokia to set up 3G joint venture in China

Nokia Corp. has signed an agreement with China Putian Co. Ltd. to establish a joint-venture company to develop and manufacture telecommunications equipment for 3G (third-generation) networks based on China's homegrown 3G technology, TD-SCDMA (Time Division Synchronous Code Division Multiple Access), and WCDMA (Wideband CDMA), the two partners announced Thursday.

The joint venture, which was not named, will be based in Wuhan, Hubei province, and will focus on developing products and providing network construction and optimization services, according to a company statement.

Under the terms of the agreement, the companies are expected to invest 900 million renminbi (US$111.1 million) in the joint venture. Nokia will be the minority shareholder in the venture with a 49-percent stake, the statement said. China Putian will hold the dominant share in the company, it said.

The deal is not the first 3G manufacturing venture created between China Putian and a foreign telecommunication equipment maker. In January, China Putian and Nortel Networks Corp. announced plans to establish a joint venture in Wuhan to produce WCDMA and TD-SCDMA gear. Ownership of that company is split 51:49 between China Putian and Nortel.

While these manufacturing joint ventures are gearing up to produce 3G equipment, they don't yet have a market in China.

The Chinese government has not issued 3G licenses and has given no formal timetable for when such licenses might be granted. One of the reasons licenses have yet to be issued is that TD-SCDMA, which has been developed in China, is not yet ready for commercial deployments.

This waiting game has kept observers and telecommunication equipment suppliers, who have long anticipated a windfall in 3G contracts from Chinese operators, playing a guessing game. For years, observers have expected to see the licenses issued, only to be disappointed. Many observers now expect China to issue 3G licenses next year. They expect regulators to issue three licenses: one for WCDMA, one for TD-SCDMA, and one for CDMA2000 1X.

The 2006 timeframe for issuing licenses is believed to be likely for two reasons: that is when TD-SCDMA will likely be ready for commercial deployment and Chinese officials are believed to want 3G networks in operation for the 2008 Summer Olympics, which will be held in Beijing.

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