wireless broadband attracting big players

Ericsson Plans to Invest $1 Bln in China Over 5 Years (Update6)
Sept. 7 (Bloomberg) -- Ericsson AB, the world's largest cell- phone network maker, plans to invest $1 billion in China over the next five years on manufacturing and research to meet demand for high-speed wireless services.

Chief Executive Carl-Henric Svanberg, 53, said today at a summit in Shanghai the investment will enable Ericsson to win a 33 percent market share in 2006 for equipment that allows faster downloads of movies and games. The company forecast China will spend $10 billion to $12 billion on so-called third-generation networks within three years of issuing licenses in early 2006.

Svanberg is betting mobile-phone subscriber growth in the world's fastest-growing major economy will raise demand for quicker networks that let users download music and send video clips. The Stockholm-based company aims to strengthen ties and supply equipment to carriers such as China Telecom Corp. and China Netcom Corp. as Ericsson develops gear for the nation's own 3G standard through a venture it formed in May with ZTE Corp.

``There'll be big demand for 3G services in China because the technology is revolutionary in terms of data transmission,'' said Gordon Wong, a Hong Kong-based analyst with South China Finance & Management Ltd. Ericsson's Chinese partner may ``lead it into the market, and help it with gathering market knowledge and understanding market preferences.''

Ericsson has 10 research and development centers in the nation and the number of engineers is growing at 50 percent, said Mats Olsson, Ericsson's president of greater China. The company has built centers in Guangzhou for services, Nanjing for time division synchronous code division multiple, or TD-SCDMA, and Qingdao for broadband access technologies, he said.

Biggest Supplier

``We're all waiting for the 3G licenses in China,'' Svanberg said. ``Capex in China is coming down a bit compared to last year because they're waiting for what's going to come. We're growing R&D here in China.''

Ericsson has a 35 percent share of the GSM market in greater China, he said. It is the biggest supplier to China Mobile (Hong Kong) Ltd., the country's largest cell-phone company, and provides 15 percent of China Unicom Ltd.'s GSM equipment, the company said.

``We're in close cooperation with China Telecom and China Netcom in preparing for 3G. We're also in development of service networks for China Telecom,'' Olsson said.

Svanberg said the global mobile-phone market is likely to reach two billion users this year, adding nearly one million a day. Worldwide, mobile penetration is 30 percent at present, according to Svanberg.

Sales Growth

``China is still the market with the largest potential,'' Svanberg said. ``It adds about five million mobile-phone users a month.''

China Mobile expects capital spending this year to exceed the $7.8 billion it forecast earlier by up to 15 percent, the company said on Aug. 10

Ericsson, which on July 21 reported an 18 percent profit increase to 5.8 billion kronor ($749 million) in the second quarter, said its Asia Pacific sales rose 8 percent in the period mainly on growth in China and India.

The company's sales growth in Central Europe, the Middle East and Africa rose 27 percent in the second quarter from a year earlier, making it the biggest region for the first time.

In 2004, Ericsson kept its No. 1 position as the biggest mobile-phone network equipment supplier, with a global market share of 26 percent, compared with second-ranked Nokia's 15 percent and Siemens's 13 percent, according to researcher ISuppli Corp.

``We're strongly committed to China -- we care about the society,'' he said. ``We've pandas we take care of and MBA students whose education we help fund. We look forward to strengthening our position here.''