Broadband Boom In China: Who To Benefit?

China, the largest telecom market in the world by subscriber count, is likely to witness broadband boom. Government clearance for nationwide implementation of home-grown 3G (TDS-CDMA) networks has prompted the three main Chinese carriers, viz, China Mobile (CHL), China Unicom (CHU) and China Telecom (CHA) to aggressively roll-out xDSL and FTTx services.

Various industry sources predicts that DSL connections may reach up to 126 million and that of FTTx connections may reach up to 50 million in China by 2014. At the end of April 2009, China had 671 million wireless subscribers, and penetration was approximately 45% in the country. It is estimated that the number of mobile users in this region may surpass 750 million by 2010.

We believe this significant broadband market opportunity will provide tremendous growth potential to several telecom equipment manufacturers. Recently, L.M. Ericsson (ERIC) received fiber-to-the home (FTTH) equipment contracts from all of China Mobile, China Unicom, and China Telecom. Ericsson’s GPON (Gigabit Passive Optical Network) technology will be used for high-speed internet access and high-definition IPTV services in 9 Chinese provinces. Alcatel-Lucent (ALU) won trial offer for its GPON switch from China Telecom for 5 deployments. Broadcom Corp (BRCM) has also decided to introduce a new family of GPON access device chips for the Chinese market that will be used in customer premises gateways.

Another potential big player in the Chinese broadband market will be ADC Telecommunications (ADCT) for fiber, coaxial and copper connectivity. Acquisition of Century Man, a leading provider of communication distribution frame solutions in China has enabled ADC Telecommunications to take advantage of the country’s massive investment in next-generation wireless networks.

We expect the competition in this market to hot up in near future as other major players like Nokia-Siemens; a joint-venture between Nokia Corp (NOK) and Siemens AG (SI), ZTE Corp, and Huawei Technologies are on the verge to enter this market.

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