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Spreadtrum is to be acquired by a Chinese high-tech investment enterprise owned by the state and also belonging to the leading Tsinghua University with microelectronics research interests

The top 10 SoC design enterprises of Mainland China had US$3.8B revenue in 2012. Out of that Spreadtrum had US$725.2M which is not less than 19%. On the ‘Experiencing the Cloud’ I’d reported extensively on the reasons:

It is also notable that this (together with MediaTek offerings) lead to Qualcomm’s SoC business future is questioned first time [May 1, 2013].

Update: TrendForce: Mediatek and Spreadtrum Advance in China Market while Qualcomm’s Chip Usage Declines [press release, June 27, 2013]

Mediatek has been making an impressive run lately; not only is the Taiwan-based chip manufacturer commanding its way in the mid-to-high end smartphone space, it has also successfully penetrated the 4G mobile market thanks to its recently announced 4G chip. According to the latest statistical data compiled by TrendForce, a global market research firm, Mediatek’s processors have been used by over 50% of China’s branded smartphones since the MT6575 chip was introduced in 2012. Due in large part to factors such as high pricing and the lack of hardware and software compatibility with various Chinese-made devices, Qualcomm’s chip usage rate has been gradually declining in China, and shrunk to as low as 33% in 2013. With Qualcomm and Mediatek both devoting their attention towards the mid to high end smartphone consumer segment, much of the low-end smartphone space has been left to Spreadtrum, which has recently unveiled a processor intended for low end hardware devices. In 2013, Spreadtrum’s chip usage rate in the Chinese market grew to approximately 11%.
imageFigure-1 2013 Smartphone processor market share in China’s smartphone market
Source: DRAMeXchange, June, 2013

Despite being an indisputable leader in the high end smartphone market, Qualcomm’s MSM8X30, MSM8X26, and MSM8X25Q processors are still facing a lot of stiff competition in the low-to-mid end mobile sectors. A way Qualcomm may reverse its struggles in China is by taking advantage of the country’s rapidly growing 4G/LTE developments. The company will have a good chance of emerging as a major LTE market leader should China’s 4G business opportunities appear early next year.  

Although Mediatek has generally been known to promote two new items on an annual basis, this year the Taiwan-based company has chosen to break away from tradition by announcing a total of four different products. The first –the MT6589– was announced during 1H13, and is intended for the mid-to-high end smartphone market; the remaining three products—all of which are smartphone chips—are expected to be introduced at some point during 2H13. Among the new processors, the duo core, Cortex A7-based MT6572 chip stood out as particularly noteworthy given its potential to exert a lot of impact on the low end smartphone market. The said chip is unique in that it supports China’s TD SCDMA system, is priced in a notably affordable range, and sports a good degree of compatibility with various low cost components (which could help push manufacturing costs down to as low as $US 40). All in all, this chip provides a perfect opportunity for Mediatek to compete against the low-end smartphone chips that are designed by Spreadtrum. The MT6575 is expected to become popular within the mid-to-low end smartphone market and should help Mediatek cement its position within the low end sector.
Following the release of the MT6589 chip, which is expected to open up new opportunities in the mid-to-low end market, Mediatek aims to introduce the quad core MT6580 and MT6582 in 2H13. MT6582 is considered a more affordable version of MT6589, and supports both qHD resolution and 8MP camera. These features are expected to help the company redefine the boundaries of a mid-end smartphone as well as increase its overall consumer appeal. The MT6580, on the other hand, is intended to be a viable alternative to a Qualcomm chip. Other than supporting 1.5Ghz speed, HD resolution, and 13MP camera, the chip is able to work with the kinds of high-quality hardware that are typically compatible with Qualcomm processors. According to TrendForce, if Mediatek is indeed successful in enhancing its presence in the high end market, a price war involving high-end processors is likely to ensue. Should this happen, both consumers and smartphone manufacturers will benefit, and the boundaries among high end smartphone devices will become less and less clear.    
With China’s recent plans to expand the TD-LTE coverage for its 500 million users by 2020, and with the 4G industry growing at a tremendously rapid pace, the LTE ecosystem in China is set to become more and more mature in the foreseeable future. Qualcomm is very likely to benefit from such a trend given its priority on the 4G/LTE business. Following the high end chip pricing war, the 4G/LTE market will likely become next battlefield for chip makers.

End of the update

Tsinghua University investment arm makes buyout offer for Spreadtrum [Asian Venture Capital Journal, June 24, 2013]

Spreadtrum [展讯] Communications [处在], a Chinese mobile chip manufacturer backed by NEA, has received a [non-binding] buyout offer from a unit of Tsinghua Holdings, an investment entity controlled by Beijing-based Tsinghua University. The offer values Spreadtrum at $1.35 billion.

According to a regulatory filing, Tsinghua Unigroup will pay $28.50 in cash for all outstanding American Depository Shares – a 20% premium on the stock’s previous closing price. Spreadtrum’s stock jumped more than 16% in response to the announcement, closing Friday at $25.91.

As of year-end 2012, NEA owned 10.4% of the company, having initially participated in the $19.8 million Series B round in 2002. Spreadtrum went public on NASDAQ in 2007, raising $124.6 million. Silver Lake bought a 13% stake for $40 million in 2010 but exited the following year.

In 2011, Spreadtrum also came under fire from short-seller research firm Muddy Waters over alleged accounting discrepancies. The company denied any wrongdoing.

“We believe that an Acquisition by Tsinghua Unigroup [紫光集团有限公司], which is majority-owned by Tsinghua University, a central player in China’s technology and R&D sectors, would provide compelling strategic synergies and position the company for additional value creation in key wireless communications markets in China and elsewhere going forward,” Unigroup CEO Weiguo Zhao said in a letter to shareholders.

Tsinghua Holdings has committed to guarantee full equity or debt funding up to the total purchase price of $1.5 billion.

Spreadtrum was founded in 2001 and develops mobile chipset platforms for 2G, 3G and 4G wireless communication standards. Customers include handset manufacturers selling into China and other emerging markets. The company posted a net income of $92.4 million for 2012, down from $134 million the previous year, although revenues jumped 7.6% to $725.2 million.

Tsinghua Holdings is a state-owned company responsible for managing the majority of Tsinghua University’s commercial assets. As of year-end 2012, Tsinghua Holdings had approximately RMB70.4 billion ($11.5 billion) in assets and a net income of RMB1.45 billion. Unigroup focuses on high-tech, biotech, real estate and urban infrastructure investments.

Tsinghua Science Park Venture Capital, which also ultimately falls under the control of Tsinghua Holdings, participated in Spreadtrum’s Series A and B rounds.

Note that this shows the strong determination by the Chineses State because:
我国大陆IC产业发展面临三大障碍 Mainland China IC industry is facing three major obstacles [Hexun.com, June 22, 2013] as translated by Google and Bing with manual edits


What are the essential elements in the development of the IC industry or power? The industry generally believes that strong government support, pragmatic policies and systems, building good infrastructure and abundant human resources, are the key elements how the IC industry in developing countries and regions may come from behind.

The operating efficiency of the Innovation Alliance, of the official mechanisms for collaboration, research, and industry R&D is not high, which is one of the significant factors restricting the rapid development of mainland China’s IC industry.

Mainland China’s IC industry in recent years gained rapid development, and some of the advantages of the competitiveness of enterprises began to appear. Taking the fastest-growing design industry as an example, in 2011 the overall IC design industry sales continued to maintain a high growth rate, reaching 47.374 billion yuan [US$7.7B], an increase of 30.2% year on year. In 2012, total sales for the top 10 design enterprises in China reached 23.117 billion yuan [US$3.8B], an increase of 2.97 billion yuan [US$484M] over the previous year. 10 companies accounted for 33.97% of total industry sales, 2.21% increase over the 31.76% in the previous year. First business sales reached $ 1.183 billion.

Spreadtrum Communications [展讯通信], RDA [锐迪科], HiSilicon [海思], Zhuhai Allwinner [珠海全志] and so on, i.e. the SoC enterprises have made great achievements in the field. But compared with Taiwanese and Korean enterprises there is still relatively slow development, the products are low-tech, and the competitiveness of the enterprises is weak. Price is also the company’s main business strategy, “design” is still not a mainstream, the situation of slow building of the base capability had not improved. Industry-wide sales may also be less than the sum of the sales of the world’s top-ranked design firms.

Note that out of the US$3.8B revenue of the top 10 design enterprises in 2012 Spreadtrum had US$725.2M which is not less than 19%. This data alone shows how important is the Spreadtrum acquisition in order to speed up the further development of the IC industry by putting the company together with the Tsinghua University which has a Research Institute of Circuits And Systems as well as an Institute of Microelectronics (IMETU), see here and here:

IMETU, the Institute of Microelectronics of Tsinghua University, was founded in 1980 on the basis of the Semiconductor Research Division, which was a research division of the Department of Electronic Engineering established in 1957. The mission of IMETU is to educate top level professionals and deliver scientific innovations in the domain Micro/Nano-electronics. During the past 30 years, IMETU has made significant contributions and key achievements for the development of China’s semiconductor and integrated circuit industry. Its faculty members and students won 8 national awards, more than 20 province or ministry level awards, as well as 136 granted patents. The institute consists of four divisions, Solid-State Devices and Integration Technologies, IC & System Design, Micro/Nano Devices and Systems, and CAD Technology. Up until March 2012, IMETU has 94 faculty and staff members, among which there are 14 professors and 46 associate professors. After 30 years of development, IMETU has been China’s leading research and education base in the area of Micro/Nano electronics. It has established a high-quality research infrastructure for microelectronics comprising of two major research directions, Micro/Nano electronics and IC & System Design. Meanwhile, alumni of IMETU have become the backbone of China microelectronic industry.

which is also the premier university partner of The Institute of Microelectronics of Chinese Academy of Sciences.

Major shareholders of Spreadtrum (with more than 5%): source Annual Reports

March 15, 2008
March 15, 2009
March 31, 2010
Feb 28, 2011
Feb 29, 2012
Feb 28, 2013
Scott Sandell [also includes New Enterprise Associates 11, Limited Partnership shares]
Entities affiliated with New Enterprise Associates 11, Limited Partnership
Entities affiliated with Fortune Venture Investment Group
Entities affiliated with Pacific Venture Partners
Entities affiliated with Silver Lake Partners
The Bank of New York Mellon Corporation
FMR LLC and Edward C. Johnson 3d
Waddell & Reed Group

source: Yahoo! Finance SPRD Major Holders

Tsinghua Unigroup Announces Offer to Buy Spreadtrum Communications [press release, June 21, 2013]

BEIJING–(Marketwired – Jun 21, 2013) – Tsinghua Unigroup Ltd. (“Unigroup”) today confirmed that it has made a non-binding offer to acquire Spreadtrum Communications, Inc. (NASDAQ: SPRD) (“Spreadtrum” or the “Company”) for $28.50 in cash per American Depositary Share (the “Transaction”). Spreadtrum is a leading fabless semiconductor provider in China with advanced technology in 2G, 3G and 4G wireless communications standards. The offer represents a premium of 20.1% over the closing price of the Company’s shares on June 19, 2013, the day preceding the delivery of the offer and 44.3% over the volume weighted closing price of the Company’s shares for the 30 trading days preceding the delivery of the offer.

Unigroup is an operating subsidiary of Tsinghua Holdings Co. Ltd., a solely state-owned limited liability corporation funded by Tsinghua University, one of the most prestigious universities in the world. Tsinghua Holdings owns and manages a substantial majority of the commercial assets of Tsinghua University. As of December 31st, 2012, Tsinghua Holdings had total assets of approximately 70.4 billion RMB [$11.45B], EBITDA of approximately 4.07 billion RMB, and net income of approximately 1.45 billion RMB for fiscal year 2012. Tsinghua Holdings’ corporate credit rating is AA+ according to CCXI, the Chinese domestic JV partner of Moody’s and the leading credit rating agency in China. Additional information about Tsinghua Holdings can be found at (http://www.thholding.com.cn/english/simpleindex.aspx). 

According to the preliminary non-binding proposal letter, Tsinghua Holdings has committed to guaranteeing the aggregate purchase price, which may be funded through a combination of equity and debt financing. 

Unigroup is excited about the proposed acquisition of Spreadtrum and the strategic opportunity this Transaction provides given the strength of this leading China-based business. Mr. Zhao Weiguo, the Chairman and CEO of Unigroup, commented, “We are enthusiastic about Spreadtrum’s business and market position globally and here in China, and we see Spreadtrum as an excellent strategic fit with Unigroup’s overall commercial objectives. We look forward to working together on the details of our proposed acquisition.” 

Unigroup’s proposal is non-binding and is subject to, among other things, satisfactory due diligence with respect to Spreadtrum and the execution of acceptable definitive agreements. There can be no assurance that Spreadtrum will support the Transaction, that any definitive binding offer will be made by Unigroup with respect to the Transaction, that any agreement with respect to the Transaction will be executed, that any conditions, including with respect to regulatory approval, will be satisfied, or that this Transaction or any other transaction, on the proposed terms or on any other terms, will be approved or consummated. Unigroup does not undertake any obligation to provide any updates with respect to this Transaction or any other transaction, except as required under applicable law.

About Tsinghua Unigroup Ltd.

Tsinghua Unigroup Ltd. (“Unigroup”) is an operating subsidiary of Tsinghua Holdings Co. Ltd., a solely state-owned limited liability corporation funded by Tsinghua University in China. Tsinghua Holdings Co. Ltd. is the controlling shareholder of Unigroup. Unigroup’s business lines include high-technology, bio-technology, science park development, and urban infrastructure construction.

About Spreadtrum Communications, Inc.

Spreadtrum Communications, Inc. (NASDAQ: SPRD) (“Spreadtrum”) is a fabless semiconductor company that develops mobile chipset platforms for smartphones, feature phones and other consumer electronics products, supporting 2G, 3G and 4G wireless communications standards. Spreadtrum’s solutions combine its highly integrated, power-efficient chipsets with customizable software and reference designs in a complete turnkey platform, enabling customers to achieve faster design cycles with a lower development cost. Spreadtrum’s customers include global and China-based manufacturers developing mobile products for consumers in China and emerging markets around the world. For more information, visit www.Spreadtrum.com.

This press release does not constitute an offer to sell or the solicitation of an offer to subscribe for or buy any security, nor is it a solicitation of any vote or approval in any jurisdiction, nor shall there be any sale, issuance or transfer of the securities referred to in this press release in any jurisdiction in contravention of applicable law.

Note that with June 27, 2007 Spreadtrum IPO on Nasdaq the company had $125.9M initial market capitalization which a year later became $209.41M; the quarterly revenue at IPO time was US$38.6M:



Data is in US$

Spreadtrum Closes $35.2 Million Series C funding [press release, June 4, 2004]

Sunnyvale, California – June 4, 2004 – Spreadtrum Communications Inc., a leading fabless semiconductor company developing and marketing innovative digital wireless communications products, today announced the completion of $35.2 million Series C financing led by New Enterprise Associates (NEA) with additional participation from existing investors, Fortunetech Investment Fund, Pacific Venture Group, Vertex, Legend Capital, HuaHong International and more.

“Proceeds from this financing will be used primarily to expand operations and to develop new product offerings,” said Dr. Ping Wu, President of Spreadtrum. ‘Spreadtrum has gained customers acceptances in the GSM/GPRS markets and is now gaining traction in the 3G area. We are very pleased to be working with these experienced venture capital firms. With their industry knowledge and resources, we are confident we will expand our global reach.
“Spreadtrum has all the components we look for when making an investment,” said Scott Sandell, NEA general partner and Spreadtrum board member. “With its experienced management team and superior technology, Spreadtrum is poised to emerge as one of the world-class fabless semiconductor companies. They continue to demonstrate their ability to develop and market their products while gaining traction in this large, explosive market.”
Spreadtrum is currently shipping GSM/GPRS baseband chipset SC6600 families and GSM/GPRS module SM5100 families. The SC6600 is a highly integrated GSM/GPRS single baseband mixed signal chip containing all digital and analog functionality for a GSM/GPRS wireless phone. The SM5100 provides both voice and data functions, and can be used in GSM/GPRS tri-band cell phones, data modems and other mobile terminal devices. Reference designs for a complete GSM/GPRS handset terminal are available. Spreadtrum also has single and dual CPU solutions for various market demands. More information about Spreadtrum products is available via email at info@spreadtrum.com.

New Enterprise Associates Participates in $20 Million Series D for Spreadtrum Communications [Baltimore Citybizlist. Oct 31, 2006]

Spreadtrum Communications Inc., a Sunnyvale, Calif.-based maker of wireless chipsets, has secured $10 million of a $20 million Series D round, according to a regulatory filing. Return backers include Fortune Venture Group and New Enterprise Associates. The company has several offices in China. www.spreadtrum.com

About Spreadtrum
Spreadtrum Communications was founded in 2001 by a group of innovative entrepreneurs with determination to face any challenge in the future. Under Dr. Ping Wu’s leadership, Spreadtrum successfully set up offices in Silicon Valley and several different cities in China. It grew rapidly within the past a few years and became a raising star in the IC and wireless communications industry. Spreadtrum’s products became the choice of many Chinese and international clients. Spreadtrum focuses on the development and sales of the new generation wireless IC, provides fast-to-market, cost-effective and high-performance solutions for wireless terminal manufactures and design houses.
Our core competitive products are:
  • 2G/2.5G/3G baseband IC: High integration, high performance, great functionalities
  • Communication software: validity, stability, customizability
  • Wireless platform: differentiated value-added open platform, reduced development time, increased product competitive edge
  • Wireless module: Customizable, flexibility, high quality
Spreadtrum not only has complete wireless terminal core chip series and related software and platform solutions that cover from high-end to low-end handset markets, but also has successfully developed world’s first single TD-SCDMA/GSM/GPRS(3G/2.5G) dual mode baseband chip as well as world’s first single integrated multimedia GSM/GPRS baseband chip. By utilizing Spreadtrumer’ expertise and newest design methodology in the industry, Spreadtrum single chips solution possesses the characteristics of higher integration, smaller size, lower power consumption and higher performance and therefore greatly reduces system BOM cost. Spreadtrum is the first IC designs company to develop its own software protocols. Its open platform allows customers to customize their products in order to differentiate themselves among competitors. Spreadtrum provides its customers with warm-hearted support and fast response time to reduce their development cycle and shorten their time-to-market.

Spreadtrum Communications [InsideChips, 2006]

Based in Sunnyvale, Calif., with most of its engineering operations in China, Spreadtrum Communications is developing chips for China’s large and rapidly growing domestic cellular market. The company is developing single-chip solutions for GSM/GPRS and TD-SCDMA/GSM/GPRS mobile devices, and has integrated all of the analog, digital and power-management functions as well as a full set of multimedia features and interfaces into the chips.

Founded only five years ago, Spreadtrum has already grown to 450 employees. CEO Ping Wu and CTO Datong Chen founded Spreadtrum with Renyong Fan (VP of operations) and Jin Ji in July 2001. The company raised $6.5 million in Series A funding at the time of founding, followed by a $20 million Series B round in Nov. 2002 and a $35 million Series C round in April 2004. The company has more than 30 investors, with the largest including New Enterprise Associates (NEA), Fortunetech Investment Fund, Pacific Venture Group, Vertex, Legend Capital and HuaHong International.

Spreadtrum offers three chip products:
  • SC6600M GSM/GPRS baseband chip – In addition to baseband functionality, the 6600 also supports a number of functions typically implemented separately on different chips. These include support for a 1.3-megapixel digital camera with video recording and playback, 64-polyphonics with stereo sound, MP3 player, USB interface and USB removable memory. Analog I/F features include a wide-range RF interface and power management on chip.

    Spreadtrum began volume shipments of the SC6600 in June 2003, primarily to domestic handset makers including TCL, Ningbo Bird, Amoi Electronics, Hisense and Putian Capitel.

  • SC8800 Single-chip TD-SCDMA/GSM/GPRS dual-mode baseband chip – Powered by the CEVA-Teak DSP core, the SC8800 enables dual-mode 2G/3G phones that operate transparently over China’s TD-SCDMA and GSM networks. As with the SC6600, the chip integrates analog, digital and power management functions on a single chip.
  • SC6800 GSM/GPRS multimedia baseband IC – The SC6800 integrates an ARM9 processor and TeaKLite DSP, 5-megapixel camera controllers, auto-focus controllers, MPEG4 accelerator and MP3 player, and supports TV out and other multimedia application-processing functionalities.
Spreadtrum also offers a wireless module, the SM5100B, which incorporates the baseband chip, RF chipset, combo flash and software. Intended for applications such as wireless desktop phones, mobile phones, remote monitoring and remote meter reading, the module provides all the required functionality for full-featured GSM/GPRS terminals.
Spreadtrum provides its customers with IP and application software, and developed its own protocol stack software. The open platform enables customers to perform high-level development to implement their own IP and value-added features.
Compared with the Europe-initiated WCDMA and U.S.-backed CDMA 2000 3G standards, China’s homegrown 3G standard, TD-SCDMA, arrived late to the game. We even heard that Chinese telecom operators were reluctant to use TD-SCDMA due to that fact. Nevertheless, the Chinese Ministry of Information Industry formally approved TD-SCDMA on Jan. 20, 2006, as the national technology standard for 3G mobile communications.
Spreadtrum projects that shipments of 3G mobile phones in China will grow to 9.5 million units by 2007, up from 3.3 million units in 2004. The Industrial Technology Information Services (ITIS), a unit of Taiwan’s Ministry of Economic Affairs (MOEA), projects subscriptions for 3G services in China will increase from 15 million in 2006 to 80 million by 2008.
However, according to market research firm ABI Research, the establishment of a national 3G network will not greatly change the existing mobile landscape. The Chinese government will provide strong policy support to help TD-SCDMA operators gain time and establish a price lead over other 3G technologies, says ABI, but GSM will continue to be the dominant technology in China over the next five to eight years.
China is conducting its final TD-SCDMA trials in select cities between March and June. These latest trials follow three earlier rounds of tests, and should be the last before commercial use.
Spreadtrum will be competing with fellow TD-SCDMA chipmakers such as Commit (a joint venture involving Nokia, Texas Instruments, LG, Putian, DBTEL and Datang), Chongyou Information Technology, T3G (a joint venture of Datang, Philips and Samsung), Analog Devices and others.
The number of Chinese IC startups has been rapidly growing over the last few years, although many appear to have relatively simple technology, few people, little cash and fairly modest expectations. But a few – such as Spreadtrum – have set their sights higher and are establishing themselves as significant technology companies. We are impressed with Spreadtrum’s high level of integration in its products, as well as its ability to attract major investors and the early establishment of a global presence. We believe the company has a good chance for continued growth and success in China’s telecom market.

Spreadtrum Communications Announces Receipt of Acquisition Proposal [press release, June 21, 2013]

SHANGHAI, June 21, 2013 /PRNewswire-FirstCall/ — Spreadtrum Communications, Inc. (NASDAQ: SPRD; “Spreadtrum” or the “Company“), a leading fabless semiconductor provider in China with advanced technology in 2G, 3G and 4G wireless communications standards, today announced that its Board of Directors has received a preliminary non-binding proposal letter, dated June 20, 2013, from Tsinghua Unigroup Ltd. (“Unigroup“), an operating subsidiary of Tsinghua Holdings Co. Ltd., a solely state-owned limited liability corporation funded byTsinghua University in China, pursuant to which Unigroup proposes to acquire the Company (the “Transaction“) for S$28.50 in cash per American Depositary Share (each American Depositary Share represents three ordinary shares of the Company).  A copy of the proposal letter is attached hereto as Appendix 1.

The Company’s Board of Directors is reviewing and evaluating Unigroup’s proposal and cautions the Company’s shareholders and others considering trading in its securities that the Board of Directors has just received the Unigroup proposal, and has not yet made any decisions with respect to the proposed Transaction, or the Company’s response to the proposed Transaction. There can be no assurance that any definitive offer will be made, that any agreement will be executed or that this or any other transaction will be approved or consummated. The Company does not undertake any obligation to provide any updates with respect to this or any other transaction, except as required under applicable law.

About Spreadtrum Communications, Inc.

Spreadtrum Communications, Inc. (NASDAQ: SPRD; “Spreadtrum“) is a fabless semiconductor company that develops mobile chipset platforms for smartphones, feature phones and other consumer electronics products, supporting 2G, 3G and 4G wireless communications standards. Spreadtrum’s solutions combine its highly integrated, power-efficient chipsets with customizable software and reference designs in a complete turnkey platform, enabling customers to achieve faster design cycles with a lower development cost. Spreadtrum’s customers include global and China-based manufacturers developing mobile products for consumers in China and emerging markets around the world. For more information, visit www.spreadtrum.com.

Appendix 1

Acquisition Proposal Letter

June 20, 2013
The Board of Directors
Spreadtrum Communications, Inc.
Spreadtrum Center, Building No. 1
Lane 2288, Zuchongzhi Road
Zhangjiang, Shanghai 201203
People’s Republic of China
Ladies and Gentlemen:
Tsinghua University, through its subsidiary Tsinghua Unigroup Ltd. (“Unigroup“) is pleased to submit this preliminary non-binding proposal to acquire Spreadtrum Communications, Inc. (the “Company,” and such transaction the “Acquisition“).
We believe that our proposal as outlined below will provide a very attractive alternative to the Company’s shareholders.  Our proposal represents a premium of 20.10% to the Company’s closing price on June 19, 2013 and a premium of 44.3% to the volume-weighted average closing price during the last 30 trading days.
In addition to the premium that our proposal would deliver to Spreadtrum shareholders, we believe that an Acquisition by Tsinghua Unigroup Ltd., which is majority owned by Tsinghua University, a central player in China’stechnology and R&D sectors would provide compelling strategic synergies and position the Company for additional value creation in key wireless communications markets in China and elsewhere going forward.
The terms and conditions upon which we are prepared to pursue the Acquisition are set forth below. We are confident in our ability to consummate an Acquisition as described in this letter.
1. Purchase Price. The consideration payable for each American Depositary Share of the Company (“ADS,” each representing three (3) ordinary shares) will be U.S. $28.50 in cash.
2. Financing. We may finance a portion of the aggregate purchase price with debt. Tsinghua Holdings Co. Ltd., our controlling shareholder, has provided us with a Letter of Support, dated June 20, 2013, a copy of which is attached hereto as Exhibit A, pursuant to which Tsinghua Holdings has committed to guarantee full funding for any equity or debt financing that may be required for the Acquisition, as set forth therein.  For the avoidance of doubt, while we may seek to finance a portion of the acquisition with debt financing, Tsinghua Holdings has agreed to provide equity funding up to the total purchase price of $1.5 billion if satisfactory debt financing is not available.
3. Due Diligence. We will be in a position to commence our due diligence for the Acquisition immediately upon receiving access to the relevant materials.
4. Definitive Agreements. We are prepared to negotiate and finalize definitive agreements (the “Definitive Agreements“) concurrently with our due diligence review. This proposal is subject to execution of Definitive Agreements. These documents will provide for representations, warranties, covenants and conditions customary for transactions of this type.
5.  Confidentiality.  Other than the announcement of this offer letter, we are confident you will agree with us that we have a shared interest in proceeding in an otherwise confidential manner, unless otherwise required by law, until we have executed Definitive Agreements or terminated our discussions.
7. Further Information About Tsinghua Holdings and Tsinghua Unigroup. Unigroup is an operating subsidiary ofTsinghua Holdings,  a solely state-owned limited liability corporation funded by Tsinghua University that is responsible for managing a substantial majority of Tsinghua University’s commercial assets.  As of December 31st, 2012, Tsinghua Holding’s total assets approximated 70.4 billion RMB and Tsinghua had EBITDA of approximately4.07 billion RMB and net income of approximately 1.45 billion RMB for fiscal 2012.  Tsinghua Holdings’s corporate credit rating is AA+ according to CCXI, the Chinese domestic JV partner of Moody’s and the leading credit rating agency in China.  Additional information about Tsinghua Holdings can be found at (http://www.thholding.com.cn/english/simpleindex.aspx).  Other shareholders include Beijing Jiankun Investment Group Co. Ltd. and Beijing Tourism Group. Unigroup’s business lines include high-technology generally, bio-technology, real estate and urban infrastructure construction. 
8.  No Binding Commitment. This letter constitutes only a preliminary indication of our interest, and does not constitute any binding commitment with respect to an Acquisition. Such a commitment will arise only upon execution of Definitive Agreements, and in such case will be on the terms provided in such documentation.
In closing, we would like to personally express our commitment to working together in bringing this Acquisition to a successful and timely conclusion.  We look forward to hearing from you regarding our proposal at your earlier convenience and kindly request that you notify us by June 28, 2013 should you desire to engage in further discussions about our proposal.
Very truly yours,
Tsinghua Unigroup Ltd.
By: /s/ Zhao Weiguo
Name: Zhao, Weiguo
Title: Chairman and President

Exhibit A
Tsinghua Holdings Co., Ltd.
25F, Building A, S.P Tower
Tsinghua Science Park
Beijing 100084, P.R. China
                                                                                                 June 20th, 2013
Chairman Zhao Weiguo  of Tsinghua Unigroup Ltd.            
10/F, Unis Plaza, Tsinghua Science Park
Beijing, 100084, P.R. China
Subject:  Tsinghua Holdings Co. Letter of Support and Agreement to Guarantee Full Funding for the Acquisition ofSpreadtrum Communications, Inc. by Tsinghua Unigroup Ltd.
Dear Mr. Zhao,
This letter (our “Letter of Support“) is to confirm our official endorsement and commitment to support Tsinghua Unigroup Ltd (“You“) in your bid to acquire Spreadtrum Communications, Inc. (NASD: SPRD) (the “Target” and such transaction, the “Project“) at the price of U.S. $28.5 per ADS for up to USD $1.5 billion (the “Support Amount“) and to guarantee any equity or debt financing that may be required for the Project.
As you know, we own and manage a substantial majority of the commercial assets of Tsinghua University, one of the most prestigious universities in the World. As of December 31st, 2012, our total assets approximated 70.4 billion RMB with 2012 EBITDA of approximately 4.07 billion RMB and 2012 net income of approximately 1.45 billion RMB. Tsinghua Holdings Co.’s corporate credit rating is AA+ according to CCXI, the Chinese domestic JV partner ofMoody’s and the leading credit rating agency in China.  Our corporate website contains further background information about Tsinghua Holdings, and can be found at (http://www.thholding.com.cn/english/simpleindex.aspx).
As the manager of the commercial affairs of the University, we are the parent company to Tsinghua Unigroup Ltd and own 51% of its outstanding capital shares.   We have officially approved the Project and have decided to fully support the Project to facilitate its rapid completion.  Although we have sufficient resources to fund the Project up to the full Support Amount from our own balance sheet, we understand that You may elect to utilize debt financing to fund a portion of the purchase price for the Target.  In any such case, we intend to assist You in obtaining any such debt financing on favourable terms.  In furtherance thereof, we will provide a corporate parent guarantee of such financing up to the Support Amount minus the amount of any equity contribution for the Project (and subject to any applicable government approvals).  In furtherance thereof, we will execute any bank or third-party guarantees and other related documents requested by you in form and substance reasonably acceptable to us and to any lender providing such funding.
At your discretion, this Letter of Support can be shared with parties with whom you are discussing the Project.
This Letter of Support and our agreement to provide a guarantee is a commitment of our broad financial enterprise, and credit support for purposes of the Project.
Yours faithfully,
Tsinghua Holdings Co., Ltd.
By: /s/ Xu Jinghong
Print Name: Xu, Jinghong
Title: Chairman of Tsinghua Holdings Co., Ltd.
To see a full copy of the signed version of these letters, click here:
http://www.prnasia.com/sa/attachment/2013/06/20130621172830287567.2 – Acquisition Offer Letter and Funding Support Letter.pdf
SOURCE Spreadtrum Communications, Inc.
Diana Jovin, ir@spreadtrum.com, +1 650-308-8148

Huawei the “misterious”

While tracking the trends related to experiencing the cloud one inevitably had to deal here with a recent giant in the mobile Internet technologies, Huawei of the mainland China:
ICT Top-100 in Mainland China and the #1 Huawei [June 4, 2011]
Huawei’s IDEOS U8150 smartphone for US$86 in Kenya: 350,000 units sold in 8 months [Aug 17, 2011] (note that this activity stemmed from the first non-infrastructure business of the company, and now it is part of the Huawei Consumer business group)
Huawei Enterprise after its 1st year and the 2012 strategy [March 26, 2012] (note that Huawei Enterprise is a new business group of the company)

While the company’s internal business structure is quite well know by this time–see this:image
from the recent Corporate Governance [Huawei webpage, Apr 23, 2012], the ownership structure is unclear, even when checking the bigger scheme representing “employee shareholding” on the same governance page of the company.

Fortunately for us the recent thorough US investigation of Huawei from the point of view of “security threat to U.S.” is providing ample material to describe here both the ownership structure, and –more importantly— the real strategic decision making structure of the company, which –you will find below– is a structure into which the Communist Party of China and the Chinese government are highly weaved into through a still uncovered web of the party organisations down to the company’s own party organisation, as well as different government organisations, including even the defense and intelligence related parts of the Chinese capitalist state. It becomes obvious from findings of the US investigation that the very much state controlled financial sector of China is also part of this complex strategic decision making structure which is behind the Huawei company.

Certainly this post has nothing to do with the security question which is just mentined in the first to video reports given below.

I. Background: the “security threat” investigation in the U.S.

All the rest is devoted to three aspects:

II. Overall findings

III. Findings regarding the relationships with the Chinese government and the Chinese Communist Party

IV. Findings regarding the founding and financing of Huawei

My goal with that was to complement my two earlier posts on:
SOEs and state coexistence in China [June 19, 2011 – Feb 24, 2012]
Entrepreneurial global brand building by the founder of the Chinese aigo [爱国者] company: a desparate attempt to avoid the death march of ruthless competition at home [Oct 11, 2012]
since Huawei is definitely not a SOE (State Owned Enterprise), but essentially driven by the state and party even more efficiently than the most of SOEs. At the same time aigo is a totally grass-roots, entrepreneurial company through the story of which one can understand the insanely wild world of true private companies now forming an equally important backbone of the Chinese economy, overall dominated by the Chinese capitalist state and the party behind. So I have now a complete picture without which one cannot understand even the Chinese high-tech sector developments which more and more are determining the future of the global ICT as clearly demonstrated by a number of trend tracking posts on this blog, such as:
Be aware of ZTE et al. and white-box (Shanzhai) vendors: Wake up call now for Nokia, soon for Microsoft, Intel, RIM and even Apple! [Feb 21, 2011 – Aug 10, 2012]
ASUS, China Mobile and Marvell join hands in the OPhone ecosystem effort for “Blue Ocean” dominance [March 8, 2011
China Mobile repositioning for TD-LTE with full content and application aggregation services, 3G [HSPA level] is to create momentum for that [June 18, 2011]
New high-tech and direct investment relationships between the US and China? [Aug 19, 2011]
China becoming the lead market for mobile Internet in 2012/13 [Dec 1, 2011 – Jan 16, 2012]
OPhone 2.5 and beyond from Borqs for China Mobile [Dec 5, 2011]
World’s lowest cost, US$40-50 Android smartphones — sub-$100 retail — are enabled by Spreadtrum [Dec 11, 2011 – Feb 27, 2012]
The ZTE way of capitalizing on the LTE opportunity [Dec 20, 2011 – Feb 10, 2012]
The new, high-volume market in China is ready to define the 2012 smartphone war [Jan 6 – July 13, 2012]
China TD-SCDMA and W-CDMA 3G subscribers by the end of 2011: China Mobile lost its original growth momentum [Jan 21, 2012]
China-based second-tier and white-boxed handset makers targeting the emerging markets[Feb 13 – Apr 17, 2012]
MWC 2012: Fuzhou Rockchip Electronics [March 13, 2012]
Core post: Boosting the MediaTek MT6575 success story with the MT6577 announcement  – UPDATED with MT6588/83 coming early 2013 in Q42012 and 8-core MT6599 in 2013 [June 27, July 27, Sept 11-13, Sept 26, Oct 2, 2012]
Core post: Lowest H2’12 device cost SoCs from Spreadtrum will redefine the entry level smartphone and feature phone markets [July 26, 2012]
Core post: MediaTek’s ‘smart-feature phone’ effort with likely Nokia tie-up [Aug 15, 2012]
Core post: The low priced, Android based smartphones of China will change the global market [Sept 10-26, 2012]
– Take note: MT6577-based JiaYu G3 with IPS Gorilla glass 2 sreen of 4.5” etc. for $154 (factory direct) in China and $183 [Sept 13, 2012]

I. Background: the “security threat” investigation in the U.S.

Opposing Views on Congress’ Claims Huawei Technologies [PBSNewsHour YouTube channel, Oct 9, 2012]

Jeffrey Brown discusses the House Intelligence Committee’s report with Rep. Dutch Ruppersberger, D-Md., which suggests Chinese telecoms pose a national security threat. Then Brown talks to Huawei Technologies spokesman William Plummer who refutes any claims of an inappropriate relationship between Huawei and China’s government.

And here is a 3d party assesment – Opinion: Is Huawei Really a Security Threat? [WSJDigitalNetwork YouTube channel, Oct 11, 2012]

Columnist Bret Stephens on a U.S. intelligence committee report that Huawei’s equipment could be used for spying. Photo credit: Associated Press.

II. Overall findings

from Investigative Report on the U.S. National Security Issues Posed by Chinese Telecommunications Companies Huawei and ZTE [A report by Chairman Mike Rogers and Ranking Member C.A. Dutch Ruppersberger of the Permanent Select Committee on
, U.S. House of Representatives, 112th Congress, October 8, 2012]

pp. 13-14

Huawei markets itself as a “leading global ICT [“Information Communications Technology”] solution provider,” that is “committed to providing reliable and secure networks.”38 Throughout the investigation, Huawei consistently denied having any links to the Chinese government and maintains that it is a private, employee-owned company.39 Many industry analysts, however, have suggested otherwise; many believe, for example, that the founder of Huawei, Ren Zhengfei, was a director of the People’s Liberation Army (PLA) Information Engineering Academy, an organization that they believe is associated with 3PLA, China’s signals intelligence division, and that his connections to the military continue.40  Further, many analysts suggest that the Chinese government and military proclaim that Huawei is a “national champion” and provide Huawei marketdistorting financial support.41

For years, analysts have struggled to understand how Huawei’s purported employee-ownership model works in practice, and how that ownership translates into corporate leadership and decision-making.43  Huawei repeatedly asserts that it is a private, employee-owned and controlled company that is not influenced by the Chinese government or Chinese Communist Party.44 Executives also asserted that the unique shareholder and compensation arrangement is the foundation of the company’s rise and success.

Available information does not align with Huawei’s description of this structure, and many analysts believe that Huawei is not actually controlled by its common shareholders, but actually controlled by an elite subset of its management.45 The Committee thus requested further information on the structure of the company’s ownership.  For example, the Committee requested that Huawei list the ten largest shareholders of the company.  Huawei refused to answer.46 At the hearing on September 13, 2012, Huawei admits that its shareholder agreement gives veto power to Ren Zhengfei, the founder and president of the company.47 Other public statements by the company undermine the suggestion that the 60,000 supposed shareholders of Huawei control the company’s decisions.  For example, in the company’s 2011 report, Mr. Ren highlighted that Huawei’s Board of Directors:

will not make maximizing the interests of stakeholders (including employees, governments, and suppliers) its goal.  Rather, it holds on to the core corporate values that are centered on customer interests and encourage employee dedication.48

pp. 15-16

Huawei officials explained that Chinese law forbids foreigners from holding shares in Chinese companies absent a special waiver.49  Current and former Huawei employees confirm that only Chinese nationals working at Huawei in the United States participate in the shareholding plan. The inability of non-Chinese employees of Huawei to hold shares of the company further erodes its claim that it is truly an employee-run organization as an entire group of employees are not only disadvantaged, but automatically excluded from any chance to participate in the process.

Huawei also provided staff access to shareholder ballots for shareholder
representatives and the Board of Directors.  These too did not appear to be facially fraudulent, but they were impossible to authenticate, especially as investigators were not allowed to remove the documents from Huawei’s facilities for third-party validation.  The documents appeared to highlight that shareholders have a write-in option for union representatives, but there is no such option for the Board of Directors.  Rather, Huawei officials stated that the nominees for the Board are chosen prior to the vote by the previous Board.  It was unclear how the original Board was established, and Huawei has consistently failed to provide any answers about who was previously on its Board of Directors.

Huawei further explained that in 1994, the first Company Law of China was
officially published, regulating the establishment and operations of limited liability companies.51 Under this law, the maximum number of shareholders was 50 individuals. Thus, in 1997, Huawei claims to have changed its legal structure to a limited liability company, and started the employee stock ownership program through the union. Similarly, Huawei asserted that in 1997, the City of Shenzhen issued policies regarding employee shareholdings.  According to Huawei, it designed its shareholder program to conform to the the Company Law of China, and the laws and policies of the City of Shenzhen.52

According to Huawei, the union, known as Union of Huawei Investment and Holding Co., Ltd., facilitates ESOP implementation.  The Union is a lawfully registered association of China.  Huawei officials stated that “Huawei’s success can be directly linked to the company’s unique compensation structure.”53 Currently, Huawei claims that the Union holds 98.7% of the ESOP shares, and Mr. Ren holds 1.3%.  At the Huawei explained that as of December 31, 2011, ESOP has 65,596 participants, which it alleges are all Huawei employees (current and retired), it claims that there are no third parties, including government institutions, holding any ownership-stake in the company.

p. 17

  • Each year, the company determines the numbers of shares an employee can purchase based on job performance.  Eligible employees must sign the Confirmation Letter and the Letter of Undertakings and make payments for the shares.
  • An employee’s stocks can be held only by the employee him/herself, and cannot be transferred or disposed by the employee.  When an employee leaves the company (except for those who meet the retirement requirements with minimal eight years of tenure and 45 years old), stocks will be purchased back by the company.
  • The current stock price is the net asset value of the stock from the previous year.  When an employee purchases more shares or the Union takes shares back, it is based on the current stock price.  The dividend amount of each year is based on the performance of the company.

p. 20

(3) Acquisition of Restricted Phantom Shares [see the Wikipedia desciption of phantom stock for clarity]

  • The restricted phantom shares of the Union shall be issued to those key employees of the Company who have displayed excellent work performance.
  • The Restricted Phantom Share Management Committee shall decide annually whether to issue shares, and the number of shares to be issued, based on the comprehensive evaluation of the work performance of such employee and in accordance with the evaluation rules of the restricted phantom shares. Retired or restructuring beneficiaries are not allowed to purchase new shares

then there is

pp. 17-18
The Commission is composed of 51 Representatives and nine alternates, elected by the Active Beneficiaries as organized by the Union with a term of five years.
– Active beneficiary is defined as an active employee who works at Shenzhen Huawei Investment and Holding Co, Ltd or any of its equity affiliates and participates in the Plan of the Union.
– In the event there is a vacancy, the Alternate shall take up the vacancy in sequence.  The Alternates can attend, but not vote at, all meetings.
The Commission
  • reviews and approves restricted phantom share issuance proposals;
  • reviews and approves dividend distribution proposals;
  • reviews and approves reports of the board of shareholding employees;
  • elects and replaces any member of the board;
  • elects and replaces any member of Supervisory Board; reviews and approves procedures forelecting representatives;
  • approves amendments of these articles;
  • reviews and approves the use of the reserve fund;
  • reviews and approves other material matters with respect to restricted phantom share;
  • perform functions as the shareholders of the company, exercises the rights of the shareholder, and develops resolutions regarding material matters such as capital increase, profit distribution, and selection of Directors and Supervisors.
The Board is responsible for regular management authority and shall be responsible to the Commission.
The main functions of the Board are to:
  • prepare restricted phantom share issuance proposal;
  • preparation of the dividends distribution proposal;
  • formulation, approval, and amendment of the detailed rules, processes, and implementation methods with respect to the restricted phantom shares;
  • preparation of the amendments to articles;
  • determination on the detailed proposal as to the use of the Reserve Fund;
  • execution of the resolutions of the Commission;
  • exercise of the specific rights and powers of a shareholder of the Investee Company except for the matters on which a resolution from Commission is required;
  • determination of other matters that shall be determined by the Board.


The Board consists of 13 directors selected by the Commission; each serves for five years
p. 19
The Supervisory Board is the organization responsible for supervising the implementation of the shareholder plan with its main functions and powers as follows:
  • supervising the implementation of the resolutions by the Board;
  • making recommendations or inquiries in event of any violation of any law, regulation or these Articles by the Board;
  • making work reports to the Commission; and
  • other regular functions and powers.
Supervisors may attend Board meetings as non-voting delegate. The Supervisory Board shall consist of five Supervisors who shall be elected by the Commission to five year terms; no Director can serve concurrently as a Supervisor.
p. 20
      • Before 31 December 2018, Mr. Ren shall have a right to veto the decisions regarding restricted phantom shares and Huawei’s material matters (resolutions of the Board, Commission, and Shareholder’s Meeting of the Company).
      • Starting from 1 January 2013, the confirmed Active Beneficiaries who represent a minimum of 15% of the restricted phantom shares (excluding the restricted phantom shares held by the Restructuring Beneficiaries and the Retained Restricted Phantom Shares) shall have a right to veto the decisions regarding restricted phantom shares and Huawei’s material matters (including resolutions of the Board, the Commission, and the Shareholders’ Meeting of the Company).
      • The relevant resolutions shall take effect in the event that the owner(s) of the right of veto does (do) not exercise the right of veto against the aforementioned resolutions.

III. Findings regarding the relationships with the Chinese government and the Chinese Communist Party

from Investigative Report

p. 21

The nature of the modern Chinese economy is relevant for understanding
Huawei’s connection to the Chinese state.  The Chinese government often provides financial backing to industries and companies of strategic importance.  Indeed, analysts of the Chinese political economy state that:

Huawei operates in what Beijing explicitly refers to as one of seven “strategic sectors.”  Strategic sectors are those considered as core to the national and security interests of the state.  In these sectors, the CCP [Chinese Communist Party] ensures that “national champions” dominate through a combination of market protectionism, cheap loans, tax and subsidy programs, and diplomatic support in the case of offshore markets.  Indeed, it is not possible to thrive in one of China’s strategic sectors without regime largesse and approval.56

Similarly, the U.S.-China Commission has explained, with Chinese companies, “the government’s role is not always straightforward or disclosed.” Despite some reforms, “much of the Chinese economy remains under the ownership or control of various parts of the Chinese government.”57  The U.S. China-Commission lists Huawei as a form of enterprise in China that exists in a relatively new market and receives generous government policies to support its development and impose difficulties for foreign competition.58

p. 22

In its written submission in response to the Committee’s questions, Huawei
simply asserted that it “maintains normal commercial communication and interaction with relevant government supervisory agencies, including the Ministry of Industry and Information Technology and the Ministry of Commerce.”62  Huawei’s failure to provide further detailed information explaining how it is formally regulated, controlled, or otherwise managed by the Chinese government undermines the company’s repeated assertions that it is not inappropriately influenced by the Chinese government.  Huawei appears simply unwilling to provide greater details that would explain its relationships with the Chinese government in a way that would alleviate security concerns.

Similarly, Huawei officials did not provide detailed answers about the
backgrounds of previous Board Members.  Rather, the Committee simply received the same biographies as previously disclosed of current members of the Board of Directors and Supervisory Board.63  Previous Board Members may have significant ties to the Party, military, or government.  And since the previous Board is responsible for nominating the current Board members, this information is important to understanding the historical progression of the company.  Because the biographies of the previous members would highlight possible connections to military or intelligence elements of the Chinese government, Huawei’s consistent failure to provide this information is alerting.

p. 23

In response to the numerous opportunities to answer questions about its
connection to the Party, Huawei stated that the company has no relevant connections. For example, in response to the Committee’s written questions about the role of the Party in the company’s affairs, Huawei merely stated that it “has no relationship with the Chinese Communist Party in its business activities.”65

Huawei admits, however, that an internal Party Committee exists within Huawei.  Huawei simply states that party committees are required by Chinese law to exist in all companies in China.66 The existence of these Committees is, however, of particular relevance.  Huawei states in its defense that all economic institutions in China are required to have a state Party apparatus inside the company.  This is not, however, a compelling defense for companies seeking to build critical infrastructure in the United States.  Indeed, experts in Chinese political economy agree that it is through these Committees that the Party exerts influence, pressure, and monitoring of corporate activities.  In essence, these Committees provide a shadow source of power and influence directing, even in subtle ways, the direction and movement of economic resources in China.67  It is therefore suspicious that Huawei refuses to discuss or describe that Party Committee’s membership.  Huawei similarly refuses to explain what decisions of the company are reviewed by the Party Committee, and how individuals are chosen to serve on the Party Committee.

IV. Findings regarding the founding and financing of Huawei

from Investigative Report


In the corresponding parts of the ivestigative report you can find a five times reference
to Mr. Ding = Charles Ding.
Regarding his previous public appearances I found on the web only one page having a photo of him embedded. As it is the only public appearance giving not only a direct visibility outside his regular job as president of Huawei in US/NA, but also some clue about what kind of strategic role he could play in various influential circles of the western world, I am copying here the whole page content as it appears now:
Georgetown Leadership Seminar 2011 [The Jewish Diplomatic Corps, March 15, 2011]

Set in one of the world’s leading academic and research institutions, Georgetown University, JDCorps’ Yariv Nornberg of Better Place [founded by Shai Agassi], attended the Georgetown Leadership Seminar in March 2011.
(From L to R) JDCorps Member Yariv Nornberg, former Sec. of State Madeline Albright, Charles Ding Huawei NA President

This seminar is a annual, prestigious event dealing with many topics of interest for World Jewry. Yariv’s attendance was the first of its kind in a decade, whereby an Swedish-Israeli Jew attended the seminar. Organized by the School of Foreign Service at Georgetown University and led by former US senior officials, each year the seminar invites some 35 emerging leaders to Washington D.C. to discuss major foreign policy issues.

And now information from the investigative report:

p. 23

In his official biography, Mr. Ren admits that he was asked to be a
member of the 12th National Congress of the Communist Party of China in 1982.  The National Congress is the once-in-a-decade forum through which the next leaders of the Chinese state are chosen.  The Party members asked to play a role in China’s leadership transition are considered key players in the state apparatus.68 Mr. Ren proudly admits that he was invited to that Congress, but he will not describe his duties.  Shortly after being given such a prestigious role, Mr. Ren successfully founded Huawei, though he asserts he did so without any government or Party assistance.69 Huawei likewise refuses to answer whether Mr. Ren has been invited to subsequent National Congresses or has played any role in Party functions since that time.70

pp. 24-25

According to Huawei officials, Mr. Ren was a member of the Chinese military’s engineering corps as a soldier tasked to establish the Liao Yang Chemical Fiber Factory and was promoted as a Deputy Director, which was a professional role equivalent to a Deputy Regimental Chief, but without military rank.71 Mr. Ren then retired from the army in 1983 after the engineering corps disbanded, and next worked for a State Owned Enterprise (SOE) following his retirement. According to this account, Mr. Ren was “dissatisfied” with his low salary and career path at the SOE, so in 1987, he established Huawei.  Huawei officials did not explain how he was able to leave his employment with a SOE or whether he got agreement of the state to do so.  Huawei officials denied that Mr. Ren was a senior member of the military.72 The Committee’s requests for more information about Mr. Ren’s military and professional background were unanswered.  Huawei refused to describe Mr. Ren’s full military background.  Huawei refused to state to whom he reported when he was in the military.  Huawei refused to answer questions about how he was invited to join the 12th National Congress, what duties he performed for the Party, and whether he has been asked to similar state-party matters.

Huawei similarly denied allegations that Ms. Sun Yafang, Chairwoman of
Huawei, was previously affiliated with the Ministry of State Security.  Mr. Ding responded to Committee questions after the hearing that, to his knowledge, reports about Ms. Yafang in Chinese publications, such as those in Xinjing Bao, are erroneous.73 Mr. Ding did not respond to questions asking about how such publications received such information, or whether Ms. Yafang’s previous biography on the Huawei website was erroneous as well.  Rather, Mr. Ding simply provided again Ms. Yafang’s corporate biography from the Huawei Annual Report 2011.74

With respect to Huawei’s founders, Huawei cited a Chinese legal equirement that new companies in the economic development zone must have a minimum of five shareholders and 20,000 RMB registered capital. During meetings with the Committee, Huawei officials claimed that in 1987, Mr. Ren raised 21,000 RMB with personal savings and five other private investors. To the best of the officials’ knowledge, none of the five investors had worked with Mr. Ren prior to start-up and one individual has previous affiliation with the government.75 According to Huawei officials, the five investors never actually worked for Huawei and withdrew their investments several years later.76

The Committee struggled to get answers from Huawei on the details of this
founding, including how Mr. Ren came to know the initial individual investors, whether his connections to the military were important to the eventual development of the firm, and whether his role in the Party remains a factor in his and his company’s success.

pp. 27-28

During the Committee’s hearing, Mr. Ding suggested he did not understand and had no knowledge of the term “national champion,” which is often used to describe favored Chinese companies throughout the economic literature on China.91 The Committee finds that Mr. Ding’s suggestion that he does not understand the term is not credible.  Huawei itself provided Capitol Hill offices a slide presentation in November 2011, which used the term “national champion” several times.92 In response to the Committee’s questions about use of the term in that document, Huawei did not deny that it used the document and provided the document containing the term.93 Rather, Huawei stated that the particular slide in the larger document was created by a third party and thus not Huawei’s responsibility.94 The Committee finds that Huawei’s knowing use of the document in its discussions with United States elected representatives is sufficient evidence to prove that Huawei does in fact have an understanding of the term.  Mr. Ding’s consistent refusal to answer questions about which firms are considered national champions in the Chinese telecommunications sector was obstructionist.  In fact, his response to the Committee’s question that “Huawei has not paid attention to the meaning of ‘national champion’ before,” is obviously untrue given the company’s use of the term in its presentations previously.95 Moreover, his answers suggest that he did not want to explain how it was that Huawei, the number one telecommunications provider in China, is not a company of strategic importance in China, as recognized by others around the world.

Huawei officials also deny that they have received any special financial incentives or support from the Chinese government.96 Huawei claimed that the company simply takes advantage of general Chinese banking opportunities, but does not seek to influence or coordinate with banks such as the Chinese Development Bank and the Export-Import Bank, which are both state owned.  In previous presentations, Huawei had suggested that it served as an “intermediary and bridge” between the state-backed financial institutions and Huawei customers.97 Huawei refused, however, to provide more detail about precisely how those lines of credit developed.  Huawei also refused to answer specifics about its formal relationships with the Chinese banks, opting to simply answer that it maintains “normal business relations” with the Export-Import Bank of China.98

p. 29

In sum, Huawei admits that its customers receive billions of dollars in support from Chinese state-owned banks and that it has received favorable loans from Chinese banks for years.  Huawei refuses to provide answers to direct questions about how this support was secured, nor does it provide internal documentation or auditable financial records to evaluate its claims that the terms of these agreements comply with standard practice and international trade agreements.  The Committee is equally concerned with statements by company leaders that undermine the Committee’s  confidence in the financial information the company has provided.  For example, in a June 2007 speech to Huawei employees in the United Kingdom, Mr. Ren stated that he appreciated the subsidiary’s attempt to create financial statements, “whether the data is accurate or not.”105 Based on available information, the Committee finds that Huawei receives substantial support from the Chinese government and Chinese state-owned banks, which is at least partially responsible for its position in the global marketplace.

p. 34

The Committee also received internal Huawei documentation from former
Huawei employees showing that Huawei provides special network services to an entity the employee believes to be an elite cyber-warfare unit within the PLA.131 The documents appear authentic and official Huawei material, and the former employee stated that he received the material as a Huawei employee.132 These documents suggest once again that Huawei officials may not have been forthcoming when describing the company’s R&D or other activities on behalf of the PLA.

Supplementary materials

Why Do Private Companies in China Have Party Committees? [ChinaForbiddenNews YouTube channel, Sept 30, 2012]
Note that the New Tang Dynasty Television (NTDTV or lately NTD) which is behind ChinaForbiddenNews (see the logo in the upper right corner of the screen) said to be founded in affiliation with Falung Gong, and one of the hallmarks of this television is strong criticism  of the CPC.

If you don’t like to follow the captions of the video then here the captions in an entire text form:

In mid September, two major suppliers of communication equipment , Huawei and ZTE Corporation, attended a hearing of the U.S. House of Representatives and answered questions regarding the threat to U.S. national security. This is the first time Chinese enterprises participated in such hearings in the U.S. Congress.

In addition to being suspected of Internet spying, U.S. lawmakers asked in the hearing why Huawei and ZTE should have party organizations.

Since February 2011, the U.S. Congress began to investigate Huawei and ZTE. On September 13, the two sides finally met. At the hearing, members of the U.S. Congress pinned harsh questions on both companies in regards to their “espionage” activity.

Committee Chairman Mike Rogers pointed out that the two companies sell espionage equipment. There are vulnerabilities hidden in the back door of
their products. It is a deliberate design which provides help for Chinese
intelligence agencies to attach network in the United States and become a serious threat to network security.

The hearing lasted three hours. Huawei and ZTE executives also defended the allegations.

In addition to the network security issue, party organizations in Huawei and ZTE had also become the focus of the questioning. U.S. Lawmakers questioned why a private enterprise would have a party organization.
how many members are in the party and whether they participate in company decision-making.

Ding Shaohua, senior Vice President of Huawei and President of North American companies, argued that a party committee is established under the PRC company law, and even Wal-Mart, a foreign-funded enterprise, has party organizations. But he declared that party organization members do not participate in enterprise management and decision-making.

Prof. Xie Tian, from the University of South Carolina’s Aiken Business School, once published an article entitled “Foreign Companies Set Up Party Branches in the New Era” which provided in-depth analysis of why the Chinese authorities force foreign companies to set up party organizations.
Xie Tian pointed out that the establishment of party organizations is in order to implement political control needs. A party branch in a private enterprise precisely displays the fact that guidance and management comes from senior party committee on the location.

Prof. Zhang Tianliang of George Mason University believes that under the Chinese Communist Party(CCP), the party’s power is always higher than administrative power. Those enterprises in Mainland China cannot survive without official support.

Prof. Zhang Tianliang: “The entire CCP system penetrates into each cell of society, including enterprises. You may not know the functions of a party committee and what it can do. It is linked with the superior party committee, the city’s party committee, and the district party committee, for it is an entire system.”

Xie Tian’s article quoted the Secretary of the Party Committee of Beijing Hyundai Motor, who said let foreign companies realize that in order to business in China, you need to connect with the political resources – party organizations. This reveals the CCP’s secret and coincides with Professor Zhang’s analysis.

Professor Zhang said that he had previously worked in a Sino-German joint venture in Mainland. Its party committee role was to supervise employees and to report to their superiors.

Prof. Zhang: “Usually this party committee engages in some activities.
After the persecution of Falun Gong began, the Party committee would act according to the CCP’s requirement to discern which employees were practicing Falun Gong. They would have a talk with him/her and fulfill the function of thought-control. It is not a problem if you don’t see eye to eye
with the committee. They will report it to their superiors and you will
be dealt with later.”

In actuality, Huawei and ZTE is experiencing long term pain in the U.S. market when they plan the international territorial.

Why have these companies not broken into the U.S. market?

A Wall Street Journal article from June 13 may provide the outside world with an answer. It wrote, “Huawei, one of the world’s largest telecommunications equipment manufacturer, seems to have found what hampers its ambitions in the US, precisely because of its official relations with the CCP.

Huawei-ZTE Congressional Hearing September 13, 2012 [Roza Kazan on behalf of CCTV, Oct 9, 2012]
Note that “CCTV NEWS is the English language news channel of China Central Television (CCTV), the nation’s largest national broadcasting network.” according to its own description.

CCTV America’s Roza Kazan (Roza Ibragimova) reports on a U.S. Congressional investigation into Huawei and ZTE, two of China’s largest telecom companies. On September 13, representatives of the two companies were invited to Capitol Hill to testify at a hearing of the U.S. Congressional Intelligence Committee. The Committee is investigating the two companies present a threat of cyber espionage and cyber attacks.

Huawei, ZTE Criticized by US Congress Committee [BizAsiaAmerica YouTube channel, Oct 9, 2012]
Note that “Biz Asia America is a daily global business news hour which aims to combine reporting of economic and financial issues in North and South America with those from China and the Asian region. For full shows go to the Beijing website http://www.cctv-america.com” according to its own description.

Correspondent [of CCTV America] Jessica Stone reports a powerful US Congressional Committee has warned US companies NOT to do business with China’s two largest telecommunication companies: Huawei and ZTE.

Impact of US criticism of Huawei, ZTE [BizAsiaAmerica YouTube channel, Oct 9, 2012]

Correspondent Jessica Stone explains how the US’s recent criticism of China’s two premier telecommunications companies-Huawei and ZTE-has on Sino-US trade relations

Some articles for further reading:
Analysis: Who really owns Huawei? [iTnews, May 28, 2010]
Staff Churn Stirs Huawei’s Management Circle [Caixin, Nov 12, 2010]
Corporate Governance [Huawei webpage, Apr 23, 2012]
Huawei: Inside the lair of the not-so-hidden dragon [The Register, Sept 30, 2012]

Good TD-LTE potential for target commercialisation by China Mobile in 2012

See also: Mobile Internet (Aug’11) which is a total update on Aug 26, 2011 with a lot of additions to the original July 19, 2010 content on the following subjects:
– LTE and LTE Advanced — HSPA Evolved (parallel to LTE and LTE Advanced) — Heterogeneous networks or HetNets — Femtocells and Picocells — Qualcomm innovations in all that — Ericsson’s LTE Advanced demo — Current roadmaps on evolutions of current 3G+ broadband mobile networks

Updates: China Mobile to set up TD-LTE network in Hong Kong [Feb 8, 2012]

The Hong Kong subsidiary of China Mobile, the largest mobile telecom carrier in China, has acquired 15-year licensed use of 30MHz-bandwidth radio frequency band 2,330-2,360MHz from the Office of the Telecommunications Authority, Hong Kong for HK$170 million (US$21.9 million), and the parent company will use the band to provide TD-LTE (Time Division-Long Term Evolution) service in Hong Kong, according to industry sources in Taiwan.

China Mobile is required to reach a minimum coverage of 50% of the Hong Kong population for its mobile services or 200 commercial and/or residential buildings for its fixed services in the initial five years following the licensing, the sources said.

China government not expected to issue TD-LTE operating license for the time being [Jan 16, 2012]

While China Mobile has been actively promoting TD-LTE, the China government is not expected to issue a TD-LTE operating license to China Mobile for the time being, according to industry sources.

China Mobile finished initial TD-LTE trials in seven selected cities in China around the end of 2011 and has proposed a second-round of trials, but the China government has not yet approved the plans, signaling the government’s attitude to slow down promotion of TD-LTE in China, the sources indicated.

This is because 3G mobile communication services are taking off in the China market and therefore the government does not want to issue a TD-LTE operating license out of consideration for China Telecom and China Unicom, the sources said.

Volume production of TD-LTE handsets to not start until end-2012 [July 14, 2011]

Although some telecom carriers plan to kick off commercial TD-LTE services in the second half of 2011, volume production of TD-LTE-enabled handsets will not be realized until the end of 2012, according to industry sources in Taiwan.

Being pushed by China Mobile, more than 10 telecom service providers worldwide have committed to support TD-LTE technology and about 20 other carriers, including those in India and Japan, are now testing TD-LTE networks, noted the sources.

However, those carriers will use devices such as mobile data cards and routers as end devices to support their TD-LTE networks initially without the availability of TD-LTE handsets, the sources added.

Although China-based handset makers may adopt single TD-LTE chips being rolled out by Innofidei and Hisilicon Technologies, most of them may begin commercial production of TD-LTE handsets at year-end 2012, the sources indicated.

International chipset makers including Qualcomm and ST-Ericsson both plan to launch LTE FDD and TD-LTE dual-mode chips, but volume production of those chips will not begin until the first half of 2012, explained the sources.

End of updates

Compulsory preliminary reading (as the information in that is the essential part of this post and generally won’t be repeated her):
China Mobile repositioning for TD-LTE with full content and application aggregation services, 3G [HSPA level] is to create momentum for that [June 18, 2011]. One esssential quote is important, however:

We are targeting commercialization next year, not in five years. In fact, operators in India and Japan plan to go commercial this year, but we are not that aggressive. So you see: 4G is not being pushed by the vendors, like 3G was. 4G is being pushed by the carriers. LTE is the only standard in the industry where, if you have a product, people will buy it right away. It’s  the reverse of how things used to be, and very interesting. LTE is being developed fast, but not fast enough.

[Bill [Xiaoqing] Huang, general manager of China Mobile’s Research Institute, response to the reporter’s question: Isn’t that a long way off in the future? Don’t you need to develop mobile broadband now?]

as well as two whole excerpts:

TD-LTE Industry Briefing – May 2011 by China Mobile [May 27, 2011]

TD-LTE Large Scale Trial in China Update –All 6 Cities Have Launched Base Stations

  • All 6 cities have launched base stations. The number of launched Base Stations has reached 20% of the planned ones.
  • The planning of continuous coverage in hot spot areas has been completed in all 6 cities. The constructions are under way:
    – 78% supporting facilities modification accomplished
    – 69% equipments arrived
    – 35% equipments installed
      • Transmission tests have been completed in several cities
      • EPC and Security tests initiated in several cities in April 2011
      • RANtests are planned to start in the end of May 2011TD

GTI Official Website: http://www.lte-tdd.org

The GTI official website was launched during the 1st GTI Workshop [on 27-28 April 2011 in Guangzhou, China]. The website shares the latest information about TD-LTE related News, Events, Reports and Statistics. GTI operators have the rights to access the Working Space on GTI website for technical presentations and further deliverables of GTI.

China Mobile Almost Finishes Pilot TD-LTE Network Deployment [June 7, 2011]

China Mobile, one of the Big Three telecom operators in the country, has completed deployment of a pilot TD-LTE network in most of the cities selected for a planned test, disclosed people familiar with the matter today.

Most of the system equipment makers have completed the first TD-LTE call in cooperation with the branches of China Mobile, according to one of the people, noting that additional telecom equipment makers are expected to make a presence in the program for an expansion of the test.

The TD-LTE network test, kicked off on March 24 with the releasing of document from the Ministry of Industry and Information Technology (MIIT), has been going on smoothly reflected by a group of telecom equipment makers’ success in TD-LTE call.

Huawei Technologies Co., Ltd., one of the top-ranking telecom equipment makers in the country, helped launch the first TD-LTE wireless connection in Shenzhen on April 6, facilitating the rollout of high-speed download service and high-definition video service based on the TD-LTE data card.

And now the new information about TD-LTE potential for target commercialisation by China Mobile in 2012:

China Mobile ambitious to lead 4G tech [by China Daily, July 11, 2011]

BEIJING – China Mobile, the country’s largest mobile telecom operator, is taking ambitious steps to promote the “fourth-generation,” or 4G mobile technologies, according to the general manager of its research institute.

“You have to be a leader, not a follower…timing is everything,” said Huang Xiaoqing [Bill], general manager of China Mobile’s Research Institute, in an interview with Xinhua.

With more than 600 million subscribers, the mobile giant, which is both listed in Hong Kong and New York, is pushing for China’s home-grown 4G standard, known as TD-LTE, or “Time Division-Long Term Evolution,” to be a globally accepted standard.

The technology is expected to provide faster broadband wireless services to meet the explosive future demand in data communication that the current 3G network is unable to deliver, Huang said.

Demand for mobile communications, especially for mobile internet, is rapidly growing, totally beyond our expectation and forecast,” he said.

The TD-LTE network is believed to be “ten times lower in price and ten times better in performance” than the current 3G service, he added.

The upgraded version of TD-LTE, or TD-LTE-Advanced, is now among the three international 4G standards accepted by the UN’s International Telecommunication Union(ITU). The other two are LTE FDD and WiMAX, which are dominated by Europe and the United States, respectively.

Currently the company has arranged large-scale TD-LTE trials in six Chinese cities and set up a demonstration network in Beijing. It has also developed a TD-LTE mobile network in Taiwan with the local Far EasTone Telecommunications for testing purposes.

According to Huang, telecommunication operators worldwide are seeking a single and unified global standard and tend to agree to the LTE standard.

China Mobile joined with seven other operators to form Global TD-LTE Initiative(GTI) at the Mobile World Congress in Barcelona in February, he said.

The GTI now has 22 members, including telecommunication giants like the UK’s Vodafone, Japan’s Softbank, and Axiata from eastern Europe. Currently, trial networks of TD-LTE have been established in 29 countries.

Goldman Sachsis also optimistic about TD-LTE’s future. In a report released late June, the investment bank said TD-LTE is becoming the global solution for unpaired spectrum due to its 3G inter-operability, large data capacity, and leverage of the LTE FDD system.

The report expects China Mobile, Bharti (India), and Softbank to launch TD-LTE services in late 2012 or 2013, which would cover nearly 2.7 billion people, or 39 percent of the world’s total population, in the three countries.

China is leading the global promotion of the TD-LTE standard, therefore, tests on the network are fully open, said Cao Shumin, vice director of the Telecommunication Research Institution under with the Chinese Ministry of Industry and Information Technology(MIIT).

The test site at the MIIT institutionhas gathered not only domestic cell phone manufacturers but also multinational tycoons like Motorola, Ericsson, and Nokia Siemens Networks.

The LTE FDD network, which is promoted by European operators, is seen as a strong competitor to TD-LTE. But as the two technologies are based on the same LTE system, they are able to share R&D results and subscribers at a global level, Cao said.

The company is also pinning hope on the 4G technology to gain back its high-end subscribers lost to China Unicom and China Telecomin the 3G business.

China Mobile, whose 3G network technology isn’t supported by the iPhone, has announced it will work with Apple on a TD-LTE-type iPhone.

Currently, China Mobile’s iPhone users can only run their device on the 2G mobile network.

But the Chinese government has not given a clear timetable for the commercial launch of TD-LTE.

Miao Wei, minister of the MIIT, said in April that China plans to commercially promote the TD-LTE technology nationwide within three to five years.

The government has only issued the 3G licenses in 2009, with China Mobile getting the self-developed TD-SCDMA standard.

The regulator is afraid that China Mobile is becoming stronger, gaining more market share and monopolizing the market,” Huang said.

China Mobile had 611 million subscribers by the end of May, of which 32 million were 3G users. China Unicom had 22.1 million 3G users in May, while China Telecom came in third with 19.7 million.

Cell Shackles Crumble [by WSJ via C114, July 12, 2011]

China Mobile Ltd. has missed out on Apple Inc.’s iPhone and other hot smartphones because China’s government forced the Chinese company to build its 3Gnetwork with a homegrown technology not used elsewhere.

Now, the world’s biggest carrier, with more than 611 million subscriber accounts, is looking to improve its situation as it prepares to roll out a fourth-generation network.

China’s government, which owns all three of the nation’s telecommunications carriers, saddled China Mobile with TD-SCDMA, a third-generation wireless technology developed in China, because Beijing thought the company’s size would help promote the technology. The government let the other two, smaller, carriers employ the foreign-developed protocols that are used in other markets.

Now, the industry is moving toward a fourth generation of mobile technologies, part of a migration that allows faster, pricier data services. China Mobile has backed a standard called TD-LTE, for time-division long-term evolution. Analysts said the company has a shot at reversing the fate it suffered with 3G, largely because the company has worked to build international support for the technology.

With 4G, most carriers so far have favored a different version than China Mobile’s technology, called FDD-LTE. In the U.S., VerizonWireless introduced 4G services using the standard last year, and AT&T Inc. will do so in some cities this summer.

But there are also major carriers interested in TD-LTE, which China Mobile is using. Bharti Airtel Ltd., India’s largest telecom company by users, has said it will adopt the protocol. U.S. wireless-service provider Clearwire Corp. last year said it would run tests with both versions of LTE. And in Japan, a unit of Softbank Corp. plans to introduce a service this yearthat it says will be compatible with TD-LTE.

China Mobile has encouraged suppliers and other mobile carriers to support the technology. Analysts said Chinese telecom-equipment maker Huawei Technologies Co. also has been a key advocate.

Analysts said development of supporting equipment for TD-LTE has lagged behind that for FDD-LTE by more than six months. But TD-LTE has advantages: It makes more efficient usethan does its cousin of wireless spectrum, a scarce resource.

In part because TD-LTE has international support, it could mean access for China Mobile to a wider range of handsets and less-expensive components, analysts said. China Mobile Chairman Wang Jianzhou in May said Apple planned to use TD-LTE on the iPhone.

China Mobile also appears to be racing ahead of its Chinese rivals toward 4G. Mr. Wang in March said the company aims this year to start commercial trials of TD-LTE using wireless modems. China Unicom [the W-CDMA licensee] Chairman Chang Xiaobing in March simply said the company was experimenting with 4G technology. And a China Telecom [the CDMA2000 licensee] spokesman last week said the carrier doesn’t have a timetable for building a next-generation network.

China Mobile and TD-LTE still face hurdles. According to the state-run China Daily newspaper in March, China’s information-technology minister said China won’t launch commercial 4G mobile services nationwide until 2014, leaving unclear how quickly China Mobile will be able to move ahead.

But TD-LTE still has more potential than China Mobile’s 3G standard did, said Duncan Clark, chairman of consulting firm BDA China Ltd. “People certainly can’t just say it has no future, which is better than TD-SCDMA,” he said.

China Mobile Shows Power Still Lies With the Party [Financial Times via China Digital Times, July 5, 2011]

At first glance it looks easy to tell who is in charge at China Mobile, the world’s largest mobile phone operator by subscribers – industry veteran Wang Jianzhou is chairman of both the Hong Kong-listed company and its majority stakeholding parent.

In reality, however, things are not so simple. In a terse notice last week the listed company revealed that Mr Wang had been replaced as secretary of the Communist party committee at the state-owned parent company by Xi Guohua, former vice-minister for information technology….

Such is the strange world of Chinese big business, where an enthusiastic embrace of the trappings of global capitalism and corporate governance collide with the hard facts of political power in a one-party state. While China’s communists long ago cast aside any pretence to ideological purity, they remain determined to keep tight control over the state companies that command the economic high ground ….

Some observers of Mr Xi’s appointment last week wonder if it is part of a wider clear-out linked to the waning influence of former Chinese president Jiang Zemin and the upcoming retirement of current leader Hu Jintao. Others see it as punishment for Mr Wang for failing to prevent China Mobile becoming ensnared in a series of corruption scandals since 2009. More benignly, the move could be seen as simply a preparation for the 63-year-old chairman’s retirement.

Wang Jianzhou: China Mobile’s Growth is Sustainable [Caijing, July 5, 2010]

With fierce market competition and an unknown model for the mobile Internet, what path should China Mobile take to continue its growth?

By staff reporters Ming Shuliang, Zhang Min, Wang Qihua and Li Weinuo

The number of mobile phone users in China continues to rise. After the last round of restructuring, the level of competition in the market intensified as two operators became three. TD-SCDMA technology is not as mature as WCDMA and CDMA2000. And the popularity of the mobile Internet has changed the original business model of the communications industry. In an interview with Caijing, China Mobile Communications Corp. Chairman Wang Jianzhou discussed the four major challenges ahead for China Mobile.

[the 1st one is the further growth in general and turning the current TD-SCDMA investment profitable in particular] Wang believes there are still growth points in China’s mobile communications market. The penetration rate in China’s rural areas is still low, and people are steadily migrating to cities, which will bring more new users and continued growth. At present, China Mobile’s revenue share of data traffic only accounts for 7.5 percent of annual income. Moreover, the demand for machine to machine communication, also known as the Internet of Things, also has some room for growth.

Wang is optimistic about China Mobile’s future growth prospects, stating that TD-SCDMA terminals have steadily improved, WiFi and LTE networks are now being built, and China Mobile’s scale dividends have yet to be tapped.

China Mobile plans to increase its TD-SCDMA subscribers to 50 million by the end of 2011. And by improving terminals and increasing network usage of its TD network, the company will pay more attention to the development of mid-to-high-end mobile phones.

[the 2nd one] China hasn’t yet issued a timetable for 4G network licensing. Wang believes that tablet PCs may become an important application for the LTE era. [Bill Huang, GM of the China Mobile Research Institute has made a possible clarification for that here: “I see them as just bigger smartphones. In fact, Microsoft and others have tried for many years to introduce tablets and failed. But when Apple introduced the iPad, which is just a big iPhone, everybody loved it. So, this proves that a successful tablet is a big smartphone. The look and feel is very similar to that of a phone.]

Driven by China Mobile, more international carriers, especially operators from the WiMAX world, are joining the TD-LTE camp. Japan-based Softbank Mobile Corp. has pledged to put its TD-LTE network into commercial use by the end of 2011.

[the 3d one] Negotiations between China Mobile and Apple Inc. have yet to conclude, and terminal subsidies are one of the key points for both sides. China Mobile only provides 3G terminal subsidies, but Apple doesn’t support China Mobile’s TD-SCDMA standard. Apple has promised to manufacture TDD standard compatible mobile phones after LTE chips come out.

[the 4th one is international expansion] China Mobile’s Pakistan subsidiaryhas widened its subscriber base to 10 million, and the company is expected to turn a profit in 2012. China Mobile’s future international acquisitions will focus on key emerging markets, TD-LTE operators and Internet companies. The company is also now considering whether it can participate in future international mergers and acquisitions as a minority shareholder.

Full article in Chinese: http://magazine.caijing.com.cn/2011-07-03/110763826.html [王建宙:增长仍将持续]

China Mobile to set up 1,000 TD-LTE base stations in five cities [March 28, 2011]

China Mobile (CHL.NYSE; 00941.HK) decides to initiate large-scale construction of TD-LTE trial network in five cities first. Five telecom equipment providers will share the construction, with each establishing 200 base stations in assigned citi (NYSE:C) es, according to www.sina.com.cn.

The TD-LTE trial network was planned to cover seven cities, including Beijing, Shanghai, Nanjing, Hangzhou, Guangzhou, Shenzhen and Xiamen, but there are only five telecom equipment manufacturers passed the external field tests so far, and each manufacturer is entrusted with network construction in one city.

Alcatel Shanghai Bell Co., Ltd. acquired the mobile TD-LTE trial network deployment program in Shanghai; Huawei Technologies Co., Ltd . took up Shenzhen; Nokia-Siemens (NYSE:NOK), Hangzhou; ZTE Corp. (OOTC:ZTCOY), Guangzhou; and Datang Telecom Technology Co., Ltd., Nanjing.

An industrial insider revealed that as long as other telecom appliance providers pass the tests, China Mobile will start the construction in Beijing and Xiamen [July 1: picked by Nokia Siemens Networks, see later] at any time.

China Mobile schedules to complete the trial network construction in the first batch of cities by September.

China Mobile TD-LTE trial network details [July 1, 2011]

Experts of China Mobile revealed the details of TD-LTE trial network that the first batch of admited equipment vendors, which including Huawei, ZTE, Datang, Nokia Siemens, Shanghai Bell, Motorola and Ericsson, have completed the testing of core network, and went into the next phase of wireless network, it is expected by the end of December, 2011, all the vendors will complete the testing.

Now, the first batch of admited equipment vendors have completed the hotspot contiguous coverage, the first base station and transmission testing in several cities, while the core network, security testing and wireless networks has also being started.

The TD-LTE network trial has three major parts: wireless networks, terminals, core network (basic function: verification, carrying and transmission).

Demo business includes home entertainment, working and living, office meetings and professional use such as high-definition wireless video on demand, 3G video-on-demand and high-speed wireless cities.

China Mobile in TD-LTE testing R&D pact [July 4, 2011]

China Mobile has entered a joint TD-LTE R&D agreement, and revealed it tapped NSN [Nokia Siemens Networks] to deploy part of its trial networkusing the homegrown 4G standard.

The operator’s R&D division, China Mobile Research Institute, has signed a MoU with Rohde & Schwarz to collaborate on the development of TD-LTE testing tools and systems, AsiaNet reported.

A stated goal of the co-operation is to speed up global deployment of TD-LTE.

NSN meanwhile announced it has been operating TD-LTE test networks in two of the six cities where China Mobile has been trialling the technology since May.

The core network has been tested, and NSN has now moved on to radio access. The vendor is also working with the ICT ministry on TD-LTE device testing, and said it will introduce devices into the trial network once the preliminary tests are complete.

China Mobile hopes to commercially launch TD-LTE in 2012, but the communications ministry in March stated it doesn’t expect significant LTE rollouts until 2014.

Nokia Siemens Networks trials TD-LTE in Hangzhou and Xiamen [July 1, 2011]

First global vendor to be awarded two cities in six-city China Mobile 4G trial

Nokia Siemens Networks has successfully been running live TD-LTE (4G) trial networks in Hangzhou and Xiamen for China Mobile, the world’s largest operator. The trial networks, operational since May, demonstrate the promise of TD-LTE to transform the mobile broadband experience in China. Trial users have been able to enjoy peak download and upload speeds of up to 100 Mbps along with uninterrupted access to applications such as video streaming and online HD video conferencing.

Nokia Siemens Networks has already finished testing the core network and is now testing radio access. It is working with China’s Ministry of Information and Industry Technology (MIIT) on TD-LTE device testing, and will use devices in the trial, when testing is completed.

“In Zheijang region, we reached a major milestone earlier this year with 50 million subscribers and can also see the data boom in the network,” said Zhong Tianhua, General Manager of China Mobile Group Zhejiang Co. Ltd. “As our long-standing partner, Nokia Siemens Networks fully understands our aim to improve the capabilities of our network to improve subscriber experience.”

Nokia Siemens Networks deployed its single RAN advanced TD-LTE equipmentin 2.3GHz and 2.6GHz spectrum. The company’s network management system, NetAct is providing configuration, monitoring and operations support system capabilities during the trial. Nokia Siemens Networks is also providing network planning and optimization services.

“Nokia Siemens Networks has been committed to developing the TD-LTE ecosystem since its inception. The Motorola Solutions’ acquisition clearly strengthens our market proposition and enables us to deliver greater value to operators, looking to adopt TD-LTE,” said Markus Borchert, head of customer operations for Greater China at Nokia Siemens Networks. “China Mobile’s trust in our TD-LTE capabilities for this large-scale trial affirms our technology leadership and readiness for large-scale commercial TD-LTE rollouts.”

ZTE launches new salvo against Huawei [June 8, 2011]

Chinese telecommunications equipment maker ZTE Corp has demanded rival Huawei Technologies Co stops making and using equipment related to fourth-generation time division long term evolution (TD-LTE) technology, expanding the legal battle between the two Chinese telecom giants.

In a lawsuit filed at the Shenzhen Intermediate People’s Court, ZTE alleged that Huawei infringed on three TD-LTE patents. The company also demanded Huawei stops participating in large-scale TD-LTE trials in seven Chinese cities that started in January.

The move came after Huawei filed four lawsuits against ZTE in Germany, France and Hungaryat the end of April, accusing it of patent and trademark infringements.

Representatives of ZTE’s communication department said on Tuesday that the Shenzhen court has accepted the case and the company is awaiting the next phase of the lawsuit.

Shi Xiaoyan, a Huawei press officer, said Huawei has received a bill of indictment from the Shenzhen court. She said Huawei welcomes ZTE’s counteraction.

“We believe the court will give us a fair trial. Huawei is a leading company in LTE technology, and we own 15 percent of the basic patents in LTE technology worldwide,” Shi told China Daily.

TD-LTE technology is a Chinese telecommunication standard. China Mobile Ltd, the world’s biggest phone carrier by users, is leading its development and striving to make it a global standard.

In December, China Mobile got approval from the Ministry of Industry and Information Technology to begin large-scale tests of TD-LTE technology in seven cities. Huawei is working with Telefon AB LM Ericsson to provide TD-LTE equipment in Shenzhen, while ZTE is supplying the equipment for the trial network in Guangzhou. Alcatel-Lucent SA is providing equipment for Shanghai and Nokia Siemens Networks for Hangzhou.

The lawsuit is unlikely to hamper China’s TD-LTE trials,” said Yang Hua, secretary-general of the TD Industry Association in China. He pointed out that the lawsuit could be lengthy and Huawei will not suspend the trial network constructionunless the Shenzhen court issues an injunction.

Yang also said he expects that all of the lawsuits are merely “paving the way for a comprehensive settlement”, because ZTE and Huawei both own a large portion of LTE patents and cannot afford to work without each other.

Ji Chendong, an analyst with the research firm Frost & Sullivan, said the competition between Huawei and ZTE has become increasingly intense, especially in the overseas market. “The market share in Asian and African countries is relatively stable, and Europe and the US are the two telecom giants’ major battlefields,” Ji said. That explained why Huawei launched the first salvo in its war on ZTE in the European market.

ZTE’s revenue rose by 50 percent year-on-year in the European and US markets in 2010, the biggest overseas contributors to ZTE’s annual growth. The company expects its revenue to grow by more than 20 percent this year, beating Huawei’s forecast of less than 8 percent.

ZTE demonstrates TD-LTE handover [July 12, 2011]

TD-LTE devices are close to hitting the market, according to ZTE, which has completed what it says was the world’s first TD-LTE to 2G/3G handover test.

The Chinese vendor saidit had demonstrated interoperability between TD-LTE terminals and GSM, UMTS and CDMA EV-DO networks.

Some operators have been reluctant to deploy the 4G technology due to concerns about TD-LTE multi-mode terminals, but ZTE claims its tests demonstrate the maturity of the standard’s ecosystem.

The China Mobile-backed TD-LTE standard is gaining traction worldwide. As of April, ZTE alone had deployed TD-LTE trial and commercial networks for 25 operators in 15 countries throughout Asia and Europe.

Indian incumbent Bharti Airtel will adopt the protocol and a Softbank unit and US wireless operator Clearwire have revealed that they will test the technology, WSJ said.

China Mobile has itself built a trial network in six cities, and has teamed up with FarEasTone to trial the standard in Taiwan.

ZTE on Friday revealed [July 8] it had secured a $900 million loan with 10 international banks to help it further expand internationally.

ZTE, first to Start the TD-LTE Large-Scale Test in Guangzhou

On March 24, 2011, China’s Ministry of Industry and Information Technology (MIIT) officially announced the kickoff of TD-LTE scale test. ZTE as one of the first vendors to enter the TD-LTE field will be responsible for building the TD-LTE network in Guangzhou, indicating the start of TD-LTE scale test in China.

This project which is organized by MIIT and China Mobile will cover six cities including Shanghai, Hangzhou, Nanjing, Guangzhou, Shenzhen and Xiamen. It will also include a demon network to be deployed in Beijing. After all the deployments are completed, China Mobile will be able to provide high-speed mobile broadband services such as HD video, 3D games, FTP transmission and high-speed Internet access for the customers in these cities. In the previous 2×2 IOT – MIIT’s entrance test for TD-LTE scale test, ZTE was the first to complete the IOT with Innofidei and Hisilicon and became one of the first vendors to build TD-LTE trial due to its innovations and commercialization.

ZTE has led the industry in TDD technology. It has kept the leading position in the TD-LTE field in terms of technology and system commercialization. In January 2011, the well-known consulting institution Frost & Sullivan released the TDD market research report, in which ZTE was ranked No.1 in terms of competitiveness.

ZTE has been actively promoting the commercialization of TD-LTE. By April 2011, ZTE had deployed TD-LTE trials and commercial networks for 22 world-leading operators in 13 countries covering Europe, India, Commonwealth of Independent States (CIS), Asia-Pacific, Southeast Asia, and so on. ZTE is building the world’s largest LTE TDD/FDD commercial network in Sweden and Denmark, which is also the first TD-LTE network in North Europe. This network will adopt ZTE’s SDR base stations, unified core network and network management platform. Besides, ZTE also actively collaborates with a large number of chipset vendors such as Qualcomm, Sequans and Altair to carry out IOT so as to jointly promote the ecosystem development.

ZTE, the Only Vendor to Provide TD-LTE Service for GTI

The Global TD-LTE Initiative 1st Workshop made its debut in Guangzhou on April 27 to 29, 2011. ZTE and CMCC presented diversified interactive service experience inside and outside the conference hall based on the TD-LTE trial in Guangzhou. The interactive service experience will include mobile video conference, HD 3D streaming and multi-mode high-speed FTP download, allowing the visitors to feel 4G in advance.

During GTI conference, the participants enjoyed the TD-LTE high-speed data service via MF820T data card which is solely provided by ZTE. The type of TD-LTE data card earned favorable comments what is the stable signal, excellent temperature-control.

GTI was officially launched by China Mobile, Bharti Airtel, Softbank Mobile, Vodafone, E-Plus, Aero2 and Clearwire at Mobile World Congress 2011. This event will help expand the international influence of TD-LTE, lay sound foundation for the global expansion of TD-LTE in future, and facilitate the implementation of global roaming and subscriber growth for TD-LTE. Besides the seven member operators, this event also attracts many operators and equipment vendors who have interest in TD-LTE development.

Guangzhou is one of the six cities in which China Mobile will carry out TD-LTE scale test. After China’s Ministry of Industry and Information Technology (MIIT) officially announced the kick-off of TD-LTE scale test on March 24, ZTE and China Mobile’s Guangzhou Branch jointly launched the first high-speed data service in the early April, which laid foundation for the development of diversified TD-LTE services.

ZTE has been actively promoting the commercialization of TD-LTE. By April 2011, ZTE had deployed TD-LTE trials and commercial networks for 22 world-leading operators in 14 countries covering Europe, India, Commonwealth of Independent States (CIS), Asia-Pacific, Southeast Asia, and so on. ZTE built the world’s largest LTE TDD/FDD commercial network in Sweden and Denmark, which is also the first TD-LTE network in North Europe. This network will adopt ZTE’s SDR base stations, unified core network and network management platform. Besides, ZTE also actively collaborates with a large number of chipset vendors such as Qualcomm, Sequans and Altair to carry out IOT so as to jointly promote the ecosystem development.

Ericsson to build TD-LTE trial network in China [April 7, 2011]

  • Will support China Mobile in its first large-scale TD-LTE trial network deployment in China
  • Network to be located in Shenzhen – a highly advanced telecoms market
  • Official interoperability tests in progress with ST-Ericsson and Qualcomm Incorporated to secure global ecosystem

China Mobile has selected Ericsson to participate in the world’s largest TD-LTE trial network deployment to date. With the approval of the Chinese Ministry of Industry and Information Technology (MIIT), Ericsson will build a TD-LTE trial network in the city of Shenzhen, one of the most advanced telecommunications markets in China.

The approval by MIIT follows the successful completion of interoperability tests of Ericsson’s TD-LTE network equipment with multiple chipset manufacturers. As part of its efforts to further develop the global ecosystem, Ericsson is proactively conducting interoperability tests with leading international players such as ST-Ericsson and Qualcomm.

Mats H Olsson, President of Ericsson China & North East Asia, says: “China Mobile has always been a formidable force in driving the evolution of telecommunications technologies. As a longtime strategic partner to China Mobile, Ericsson will fully support our customer in its tremendous endeavor to make TD-LTE a reality in the foreseeable future. Tens of millions of users, not only in China but also around the world, will benefit from the new and better services enabled by the superior TD-LTE technology, and we are thrilled to be part of this initiative.”

Ericsson will provide the industry-leading end-to-end TD-LTE solution, which includes its latest multi-standard base station, RBS 6000 and its commercially proven Evolved Packet Core (EPC) network; operations support systems software and professional services. As early as July 2010, Ericsson demonstrated extremely high-speed multimedia applications enabled by its TD-LTE solution in Shanghai, China. [First complete TD-LTE solution showcased [July 12, 2010]] And in February this year, Ericsson achieved another milestone by making the world’s first TD-LTE voice call over its LTE/EPC network in Barcelona, Spain. [Ericsson showcases voice over TD-LTE for China Mobile [Feb 14, 2011]]

In August of this year, Shenzhen will host the 26th Universiade, or World University Games. According to the deployment schedule, the network will be ready in time for athletes and visitors, together with the city’s population of more than 10 million, to enjoy the TD-LTE experience made possible by Ericsson.

Alcatel-Lucent and China Mobile speed the delivery of mobile broadband in China [May 11, 2011]

Alcatel-Lucent (Euronext Paris and NYSE: ALU) and China Mobile have announced a major step toward the delivery of high-speed mobile broadband to subscribers in China by successfully completing the first call over a trial TD-LTE network deployed in the city of Shanghai.

Alcatel-Lucent’s end-to-end 4G LTE solution in Shanghai is a vital element of the large-scale TD-LTE trial formed by the China Ministry of Industry and Information Technology (MIIT) and China Mobile, covering six major cities in China, to commercially showcase the advantages of TD-LTE technology in delivering high-speed applications and services to millions of customers.

As a key partner of China Mobile, the largest mobile operator in the world, Alcatel-Lucent is utilizing its expertise in TD-LTE to deliver a highly-efficient and cost-effective network to the large population of data-hungry subscribers in the central business and education/technology districts of Shanghai.  The network includes the high-tech park of Zhangjiang and financial district of Lujiazui, which China Mobile and the Shanghai Government want to make a leading demonstration zone of TD-LTE technology. The successful completion of this first call is a major milestone in realizing this goal.

“We are excited to be able to collaborate with China Mobile and demonstrate our leadership in TD-LTE on this important trial network. The first call takes us a step closer in delivering a high-quality network that will provide faster wireless services and applications to the people of Shanghai,” said Rajeev Singh-Molares, president of Alcatel-Lucent ‘s activities for Asia-Pacific.

Alcatel-Lucent and China Mobile further enhanced their relationship in April of this year by announcing a joint research program to pioneer developments in next generation mobile communications, including further co-development of Alcatel-Lucent’s lightRadio solution.

Alcatel-Lucent has established a strong leadership position in LTE, being selected so far by fourteen customers for commercial deployments — including two of the world’s largest service providers — and being involved in over 60 LTE trials worldwide.

Alcatel-Lucent and China Mobile to Co-Develop Future of Mobile Networks [April 20, 2011]

Alcatel-Lucent (Euronext Paris and NYSE: ALU) and China Mobile today announced a wide-ranging joint memorandum of understanding to pursue pioneering developments in next generation mobile communications including further co-development around Alcatel-Lucent’s powerful lightRadio™ technology.  The partnership agreement was signed by Romano Valussi, President of Alcatel-Lucent in China, and Bill Huang, president of China Mobile Research Institute in a signing ceremony in Beijing today.

China Mobile is the biggest mobile operator by subscribers in the world.  Alcatel-Lucent is a leader in radio access, IP, and optical technologies – all critical elements in mobile networking – thanks to its flagship Bell Labs research arm which invented and continues to invent many of the fundamental networking technologies of today and tomorrow including the much heralded lightRadio cube.

This research collaboration will further extend the close relationship between the two companies, establishing the framework to jointly explore:

  • the evolution of mobile network architectures leveraging and integrating China Mobile’s Cloud-RAN and Alcatel-Lucent’s lightRadio and advanced antennas technology;
  • explore the evolution of core network structure on the basis of network virtualization; and
  • develop technologies and approaches for alternative energy use to achieve green ICT

The MOU is mutually initiated and endorsed by Wang Jianzhou, Chairman of China Mobile and Ben Verwaayen, Alcatel-Lucent CEO.

Ben Verwaayen, CEO of Alcatel-Lucent, said: “This vital collaborative agreement will bring together two industry leaders, using joint research, to bring new breakthroughs to market at what we call ‘the speed of ideas’.”

Wang Jianzhou, Chairman of China Mobile said “Co-development with Alcatel-Lucent Bell Labs will benefit evolving our network technology to support the next generation of mobile-based applications, experiences, economies, and social networks.”

Alcatel-Lucent to help China Mobile deploy world’s largest 4G TD-LTE end-to-end trial network [March 24, 2011]

Alcatel-Lucent (Euronext Paris and NYSE: ALU) today announced it has been selected by China Mobile to participate to the world’s largest 4G TD-LTE trial network deployment in China. This qualification follows successful completion of various interoperability tests which started from January 2010 as required by the Chinese Ministry of Industry and Information (MIIT) and China Mobile. Alcatel-Lucent Shanghai Bell, Alcatel-Lucent’s flagship company in China is one of the first suppliers to have successfully achieved this key milestone and will be deploying its end-to-end LTE solution for China Mobile’s large-scale 4G TD-LTE trial in the city of Shanghai.

Covering 6 major Chinese cities, namely Shanghai, Hangzhou, Nanjing, Guangzhou, Shenzhen and Xiamen, and recently extended to Beijing, this large scale TD-LTE trial will help China Mobile to provide a wide range of high speed mobile broadband services to its subscribers, such as high definition video, 3D gaming, FTP transmission and high speed Internet. It will also enable new industries with LTE connectivity like automotive industry and multi-industry ecosystem development thanks to initiatives pioneered by Alcatel-Lucent through the ng Connect Program launched two years ago.

Rajeev Singh-Molares, president of Alcatel-Lucent’s activities in Asia-Pacific said: “This is a major accomplishment for Alcatel-Lucent and clearly reinforces our leading position in China and our global leadership in LTE. We are committed to provide China Mobile with the most advanced LTE solution for the world’s largest TD-LTE trial and to demonstrate the maturity and cost-effectiveness of our solution for TD-LTE which is emerging as the 4G standard for TDD spectrum globally. The successful interoperability tests with terminal suppliers further demonstrate our commitment to create an open TD-LTE ecosystem that will participate in the broader global LTE value chain.”

The tests were conducted in both 2.3GHz and 2.6GHz frequency bands for indoor and outdoor deployments and relied on Alcatel-Lucent’s industry-leading LTE expertise to provide an end-to-end integrated solution including LTE base stations (eNodeBs), the Evolved Packet Core (EPC). Alcatel-Lucent’s solution successfully passed interoperability tests with two major terminal suppliers.

Alcatel-Lucent is a key partner of China Mobile on TD-LTE and next generation wireless networks initiatives and evolution programs. During the 2010 Shanghai World Expo Alcatel-Lucent supported China Mobile in the first large-scale TD-LTE trial network deployment delivering advanced mobile services including ultra high speed Internet access and High Definition TV (HDTV). Most recently, at Mobile World Congress, Alcatel-Lucent and China Mobile demonstrated with Audi, a variety of in-vehicle high-value applications that worked seamlessly on a converged Time Division Duplex (TDD) and Frequency Division Duplex (FDD) network ensuring seamless global coverageand the ability to benefit from a common LTE ecosystem across both modes. Alcatel-Lucent and China Mobile are partnering to develop next-generation radio access network based on Alcatel-Lucent’s lightRadio, a groundbreaking innovationto prepare wireless networks to handle the explosive growth in demand for wireless broadband services while making the networks more eco friendly.

Having been selected so far by twelve customers for commercial deployments — including two of the world’s largest service providers— and being involved in over 60 trials worldwide –- including thirteen LTE TDD trials in seven countries — Alcatel-Lucent has established a strong leadership position in LTE.

More information about Alcatel-Lucent and LTE: http://www.alcatel-lucent.com/lte

About Alcatel-Lucent(Euronext Paris and NYSE: ALU)

The long-trusted partner of service providers, enterprises, strategic industries and governments around the world, Alcatel-Lucent is a leader in mobile, fixed, IP and Optics technologies, and a pioneer in applications and services. Alcatel-Lucent includes Bell Labs, one of the world’s foremost centres of research and innovation in communications technology.

With operations in more than 130 countriesand one of the most experienced global services organizations in the industry, Alcatel-Lucent is a local partner with global reach.

The Company achieved revenues of Euro 16 billion in 2010 and is incorporated in Franceand headquartered in Paris.

For more information, visit Alcatel-Lucent on: http://www.alcatel-lucent.com, read the latest posts on the Alcatel-Lucent blog http://www.alcatel-lucent.com/blog and follow the Company on Twitter: external linkhttp://twitter.com/Alcatel_Lucent.

Additional information on mobile infrastructure vendors participating in the TD-LTE trials by China Mobile (sans Datang for the time being):

  • Huawei
  • ZTE
  • Ericcson (+ acquisition of divested Nortel assets strategic for Ericsson)
  • Nokia Siemens Networks (NSN)
  • Alcatel-Lucent (with special emphasis on lightRadio and related QorIQ Qonverge SoCs from Freescale quite essential for that)

I. Huawei

Huawei Showcases Cutting-Edge LTE TDD Technology at the16th Asian Games [Nov 24, 2010]

Huawei, a leader in providing next-generation telecommunications network solutions for operators around the world, today announced that it has exclusively deployed a LTE TDD trial network for China Mobile at the 16th Asian Games in Guangzhou. Visitors to the Asian Games are able to enjoy a range of cutting-edge services, such as mobile HD (high definition) video conferencing and surveillance and HD video on demand. Using a portable digital video camera with the LTE TDD module-embedded, members of the media can send real-time high-resolution photos and live broadcast video across the world.

“As the use of data services is at an all-time high around the world, the development and rapidly growing uptake of LTE is in direct response to consumer requirements for faster mobile communication services,” said Ying Weimin, President of LTE Network, Huawei. “The success of this deployment, along with the success of our LTE TDD network at the Shanghai Expo, reaffirms the high performance and reliability of LTE TDD solutions and demonstrates Huawei’s commitment to enabling operators around the world to deliver superior mobile media experiences to their customers.”

Huawei’s demo network delivers the following solutions and services:

  • Low carbon and cost efficient LTE TDD base station, based on Huawei’s industry-leading SingleRAN solution
  • Evolved Packet Core (EPC)
  • HD video conferencing, mobile HD video surveillance, catch-and-transfer, live broadcast, and HD video on demand (VOD)
  • LTE TDD devices featuring high-end chipsets
  • E2E service deployment, management, and service guarantee

As a leading provider of E2E mobile broadband solutions, Huawei constructed the world’s first LTE FDD network for TeliaSonera in Norway and was awarded the world’s first LTE TDD commercial contract from Aero2 in Poland. To date, Huawei has won 18 commercial LTE contracts and has partnered with leading operators in Europe, North America, Asia Pacific and the Middle East to deploy over 70 LTE/EPC trial networks deployments around the world.

Huawei Awarded the World’s First Commercial Frame Contract Covering LTE TDD Technology in Poland [Nov 18, 2011]

Huawei, a leader in providing next-generation telecommunications network solutions for operators around the world, today announced that it has been awarded a frame contract to deploy the world’s first commercial LTE TDD network for Aero2, Poland’s leading mobile broadband operator. With Huawei’s end-to-end LTE TDD/EPC (Long Term Evolution/Evolved Packet Core) solution, the network will allow ultra-speed data rates and deliver rich experiences and high-quality mobile broadband services, such as video call and mobile Internet access, to Aero2’s subscribers. The network will become operational in early 2011.

“Aero2 is committed to providing high-quality mobile broadband services for our customers and introducing cutting-edge telecom technologies in Poland,” said Adam Kuriański, the President of Aero2. “We are confident that with Huawei’s advantages in LTE technology, we will be able to offer users a rich communications experience with the deployment of the LTE TDD network.”

“This milestone demonstrates that LTE TDD technology is already mature, stable and reliable for large-scale deployment,” said Ying Weimin, President of LTE Network, Huawei. “Based on Huawei’s LTE unified platform supporting both LTE FDD and LTE TDD, we are confident that the network will contribute to Areo2’s success in the mobile broadband era.”

Due to their long-term partnership, Aero2 and Huawei have achieved a series of breakthroughs in LTE, benefiting from Huawei’s LTE FDD and TDD unified platform. In September, 2010, the world’s first commercial LTE FDD network, on 1800MHz band, was launched in Poland. Recent LTE TDD lab testing with Aero2 in Poland showed that download throughput rate reached up to 100Mb/s.

As a leading provider of end-to-end mobile broadband solutions, Huawei has constructed the world’s first LTE FDD network for TeliaSonera in Norway and supported China Mobile to deploy the world’s first pre-commercial LTE TDD network at the 2010 Shanghai World Expo. To date, Huawei has won 18 commercial LTE contracts and has partnered with leading operators in Europe, North America, Asia Pacific and the Middle East to deploy over 70 LTE/EPC trial networks around the world.

About Aero2

Aero2 is a new comprehensive telecommunications provider in Poland. The company builds mobile networks and broadband Internet access. The coverage of Aero2 has already reached more than 40% of the Polish population. Aero2 has a radio frequency of 900 MHz and 2.5 GHz.

Huawei Launches Industry’s First WiMAX and LTE TDD SingleRAN Solution [Nov 3, 2010]

Huawei, a leader in providing next-generation telecommunications network solutions for operators around the world, today released the industry’s first commercially available WiMAX and LTE TDD SingleRAN solution. This end-to-end solution enables operators to seamlessly migrate from WiMAX to LTE TDD networks.

Huawei is the first vendor to offer a commercially available solution consisting of a WiMAX and LTE TDD dual mode remote radio unit (RRU) and dual mode base band unit (BBU), which fully support 2.3GHz, 2.5GHz and 3.5GHz mainstream Time-Division Duplexing (TDD) frequency bands. Based on Huawei’s leading SingleRAN ability, Huawei WiMAX RRU has been widely applied in several operators’ current operating WiMAX networks. It is a 4T4R (four transmitters and four receivers) design that supports multi-input multi-output (MIMO) and Beamforming (BF), and it can be flexibly configured as a WiMAX module, a LTE TDD module, or a WiMAX and LTE TDD dual mode module simply by upgrading the software.

This solution also features an end-to-end advantage by adopting Huawei’s SingleEPC packet core network solution, which enables GPRS, UMTS, LTE, and WiMAX users alike to enjoy high-speed mobile broadband access with converged and smart network management.

“Huawei’s WiMAX and LTE TDD SingleRAN solution will provide our customers with great flexibility,” said Tang Xinhong, Vice President of Wireless, Huawei. “By adopting Huawei’s SingleRAN solution, operators will be well-positioned to adapt and evolve their networks to any standard in the future. This solution also offers operators current investment protection and an overall lower total cost of ownership.”

Huawei supported China Mobile to deploy the world’s first pre-commercial network using its LTE TDD solution. This network successfully demonstrated a variety of mobile broadband services, including high definition (HD) transmission, HD video conference, HD video monitoring, HD video-on-demand (VOD) and HD live broadcasting to visitors in the 2010 Shanghai World Expo Park and some key pavilions.

Huawei has won over 79 commercial WiMAX networks contracts worldwide and is adding new ones faster than any other vendor in the world. Huawei has a wealth of experience in delivering global WiMAX projects, and has partnered with operators worldwide including BSNL in India, Globe in the Philippines and MTN in the Middle East and Africa.

China Mobile Launches World’ s First TD-LTE Network with Huawei’ s E2E Solution [May 6, 2010]

Huawei, a leader in providing next-generation telecommunications network solutions for operators around the world, today announced that it has assisted China Mobile Communications Corporation (CMCC), the world’ s leading telecom operator, launched the world’ s first TD-LTE/SAE trial network enabled by Huawei’ s E2E solution. The network, which offers a more than 10 times faster download data rate than existing 3G networks, will serve the entire 2010 Shanghai World Expo Park and some key pavilions.

Construction of the network faced challenges due to the more than 70 million visitors expected throughout the Expo and the complex coverage area that includes grass lands, rivers, roads and high density buildings. To address these challenges, Huawei’ s industry-leading E2E TD-LTE/SAE solution provides high-quality, high-speed, large capacity and low latency coverage. With this technology, visitors to the Expo will have access to a variety of mobile broadband services, including high definition (HD) video transmission, HD video conference, HD video monitoring, HD video-on-demand (VOD) and HD live broadcasting.

Li Changzhu, Vice President of China, Huawei, said: “This TD-LTE/SAE network is one of the most exciting innovations to be showcased during the Expo. Visitors from around the world will enjoy the unparalleled services offered by China Mobile’ s TD-LTE network. This milestone illustrates Huawei’ s commitment to support operators around the world in delivering truly mobile media experiences to consumers.”

As a major investor in TD-LTE/SAE technology and contributor in the development of its standardization, Huawei believes that the common development of TD-LTE and LTE FDD facilitates the efficient use of limited spectrum resources to meet performance and cost requirements of mobile broadband.

In May 2009, Huawei demonstrated TD-LTE-based inter-site and inter-cell switching for the first time in the world, marking a great leap forward toward massive commercial TD-LTE deployment. To date, Huawei has conducted more than 60 LTE networks, including commercial and trials with world leading operators. As of March 2010, Huawei has submitted more than 4,700 LTE/SAE standard proposal contributions to 3GPP and holds 181 LTE essential patents, becoming No.1 and account for 34% of the infrastructure vendors in LTE essential patents.

Huawei Deploys World’ s First TD-LTE Trial Network for 2010 Shanghai World Expo [Nov 13, 2009]

Huawei, a leader in providing next-generation telecommunications network solutions for operators around the world, today announced the deployment of world’ s first TD-LTE/SAE trial network for China Mobile. This new network with an actual download speed of up to 29Mb/s will be used for 2010 Shanghai World Expo.

Wang Jianzhou, Chairman and Chief Executive Officer of China Mobile, said: “This state-of-the-art network covers the whole site of 2010 Shanghai World Expo, which will fully demonstrate the capability of TD-LTE technology.”

As the only vendor able to provide end-to-end TD-LTE/SAE solutions, Huawei deployed the TD-LTE radio access network and SAE core network for China Mobile, and delivered chipsets and terminals. These infrastructures and terminal devices enabling high definition (HD) video transmission, HD video monitoring, HD video-on-demand (VOD) and mobile Internet will support the live broadcasting and security for the coming events.

“TD-LTE/SAE technologies with the advantage of low latency and high spectrum efficiency are getting increasingly more recognition from operators and telecom organizations.” said Li Changzhu, Vice President of China Marketing, Huawei , “As most of the significant technical innovations will be showcased during the Expo, this TD-LTE/SAE trial network is one of the most exciting innovations during the event. This network adopted Huawei’ s integrated LTE solution of FDD and TDD technologies, as well as the SAE core network which is being used in world-leading operators’ network modernization.”

Huawei has been appointed to deploy the world’ s first LTE network for TeliaSonera and Europe’ s largest LTE network for Telenor. Over 20 LTE/SAE trials have been deployed by Huawei for global operators.

Huawei’ s SAE Solution Successfully Completes TD-LTE Tests for 2010 Shanghai World Expo [Nov 5, 2009]

Huawei, a leader in providing next-generation telecommunication solutions to operators around the world, today announced that it’ s SAE (System Architecture Evolution) solution has successfully completed all the mandatory and optional tests on the TD-LTE trial network for 2010 Shanghai World Expo. The tests were conducted by China Mobile Research Institute and Shanghai Mobile, a subsidiary of China Mobile, to evaluate the LTE/SAE solutions among all the leading vendors for deploying the commercial TD-LTE network for the coming event.

The core network tests verified the functionalities of MME (Mobility Management Entity), Serving Gateway, PDN Gateway and the HSS (Home Subscriber Server). According to the result of the tests, Huawei is the only vendor with its commercial SAE solution that has successfully passed all 119 tests.

“We are honored to have the opportunity to participate in 2010 Shanghai World Expo, and fully confident to support its success through our advanced LTE/SAE network solutions.” said Wang Gang, Director of China Marketing, Huawei Core Network, “The excellent performance of Huawei SAE solution in this test reflects our deep understanding and continuous investment in LTE technology, and the long-term commitment of providing world-leading mobile broadband solutions to operators worldwide.”

As a partner of Shanghai Mobile, Huawei provided end-to-end network solutions for the TD-LTE trial, including mobile network, SAE, terminals, chips and transmission systems.

Huawei Demonstrates World’s First Handoff Tests Between TD-LTE Base Stations [May 14, 2009]

Huawei Technologies Co., Ltd. (“Huawei”), a leader in providing next-generation telecommunications network solutions for operators around the world, today announced that the company was selected by the Next Generation Mobile Network Congress to provide the new end-to-end TD-LTE/SAE solution for field testsat its conference held in Beijing on May 11-12, 2009. World leading operators including Vodafone, NTT DoCoMo, AT&T, China Mobile, TI and TeliaSonera participated in the conference and jointly discussed the development of future networks.

As the sole provider of the network for testing, Huawei conducted a live demonstration of the world’s first handoff tests between TD-LTE base stations with a 100-percent success rate. These field tests demonstrated the ability of Huawei’s network to successfully deliver the handoff or handover technology that facilitates phone calls between different technologies. The completion of the test marks a major forward step in the evolution of TD-LTE technology.

“Due to the rich resources in the TDD spectrum, the application of TD-LTE is currently of great interest to operators both in China and beyond. We are very confident about the future of TD-LTE which is one of the major next-generation mobile broadband platforms.” said Wan Biao, President of Huawei Wireless Product Line. “Huawei is committed to promoting the development of LTE through its proven expertise and extensive global application experience.”

Huawei also showcased the world’s first multi-user access and multi-cell handoff tests based on a TD-LTE network at the event. Different terminalswere used to simultaneously demonstrate the services based on TD-LTE, such as VOD, video phone and VOIP.

Huawei has been researching LTE technology since 2004 and, in December 2008, was awarded with the world’s first LTE commercial contract, with Teliasonera. By the end of March 2009, Huawei had submitted more than 2,500 LTE/SAE applications and has contributed 20 percent of all the patents in LTE field.

The brilliant debut TD-LTE elevates experience at World Expo [by Huawei, April 28, 2011]

The World Expo is a great event to showcase the best achievements of human civilization, including telecommunications advancement. At the 2010 World Expo Shanghai, TD-LTE was first introduced, pointing to the future of 4G mobile broadband in China.

TD-LTE’ s global debut

As one of the world’ s largest mobile operators, China Mobile is a global partner of the Shanghai World Expo. In 2009, it selected vendors including Huawei to deploy the World Expo TD-LTE Demo Network, the first of its kind in the world, signifying the debut of TD-LTE in the largest mobile communications market in the world.

Straddling both sides of the Huangpu River between the Nanpu Bridge and Lupu Bridge, the Shanghai Expo Park covers an area of 5.28 square kilometers and is the largest expo park in history. The Expo is also likely to be the largest World’ s Fair ever in terms of visitor numbers as Expo organizers expect about 70 million visitors during its 6-month run.

To showcase the latest achievements in and promote the TD-LTE industry, China Mobile invited dozens of well-known vendors and providers to join in the demo project in 2009. Thanks to its outstanding overall test results, the strength of its end-to-end solutions and its rich experience in commercial/pilot LTE network deployments outside China, Huawei was selected as a key partner to exclusively build the outdoor TD-LTE network in the Expo Park and provide support and guarantees for outdoor service demonstrations.

For this largest TD-LTE demo network in the world, Huawei has provided an end-to-end TD-LTE solution including base stations, EPC core network equipment, CPE terminals, and a service platform. With 17 outdoor distributed TD-LTE base stations, the solution has delivered complete outdoor coverage for the entire Expo Park and even on the Huangpu River that runs through the Park.

Fabulous TD-LTE experience

On the Shanghai Expo TD-LTE Demo Network, a series of great mobile broadband services are demonstrated, showcasing the advanced TD-LTE capabilities and features, especially the diversified mobile high-definition (HD) video applications that require high-end network and even end-to-end system capabilities.

For various groups such as friendly users and security personnel, the Demo Network facilitates mobile broadband services such as HD video conferencing, multi-way HD video surveillance, portable video surveillance, instant shoot & transfer, and high-speed wireless network access. HD video conferencing, portable video surveillance, and instant shoot & transfer services are all carried over the mobile network for the first time, marking a major breakthrough in mobile broadband development.

Mobile HD conference brings people closer

Video conferencing is efficient while saving time and money. Its increased popularity means that video conferencing systems are expected to be reliable and render high-definition images.

Under normal circumstances, video conferences are held at fixed venues, where access is provided through fixed broadband to meet bandwidth and latency requirements. Yet, it is increasingly desirable for professionals and businesspeople to do business on the move and they expect to have the same real-time communication experience with HD conferencing as they do face to face.

The China Mobile TD-LTE Demo Vehicle in the Expo Park cruises visitors at speeds of up to 40 km/h (speed limit for the Expo Park and nearby roads). Another TD-LTE test vehicle running on the Pudong South Road outside the Expo Park connects users to the Huawei Telepresence HD conferencing system and the TD-LTE network covering the Expo Park. Users are able to experience clear imaging (with delays of less than 1s and with no frame loss nor mosaic), and complete audio/video synchronization. Videoconference participants evidently can get nearly the same experience as in a meeting room and have been duly impressed.

HD video surveillance ensures a “Safe Expo”

The Shanghai World Expo has rapidly attracted visitors from home and abroad. Since the end of May, the average number of visitors has hit 400,000 each day with more than 500,000 per weekend day. All of the venues, roads, pavilions, combined with buses and Huangpu River ferries present major safety and security challenges. To ensure the safety of visitors, an HD video surveillance system has been put in place.

Traditional video surveillance systems are simply not enough. Buses, ferries and people move. In typical mobile video surveillance systems, image definition is often sacrificed for mobility. Mobile video monitors often adopt CIF or QCIF for code resolution and the image definition is usually 1/4 or even 1/16 of standard definition.

The introduction of the mobile HD video surveillance system over the TD-LTE network clears up the images. The system enables the images collected by mobile video monitors to reach the level of standard definition by improving the video quality up to 16 times, allowing for the display of 720P/1080P HD videos. The system not only renders videos with quality comparable to a fixed network but also satisfies other mobility and higher bandwidth needs in terms of end-to-end experience and application scenarios.

Real-time full-range monitoring contributes greatly to effectively ensuring visitor safety and the TD-LTE video surveillance system covers the entire Expo. The ferries on the Huangpu River, buses on the land, and surrounding high-rise buildings are all closely monitored with video specific for various scenarios.

During surveillance planning, China Mobile and Huawei ingeniously introduced portable video transfer. Both TD-LTE CPE (portable TD-LTE terminal) and devices such as batteries and video codecs are put into a backpack weighing about 3kg. Carrying the pack on his/her back, a single person can handhold a portable DV camera, shoot a scene and then transfer the video back to the surveillance center in real time over the TD-LTE network for evaluation. In this manner, the TD-LTE mobile HD video surveillance system perfectly serves the needs of the Shanghai Expo by equally emphasizing all aspects, large or small. General surveillance is thus maintained as more specific and detailed information is scrutinized. Furthermore, portable video transfer is so flexible that it can be deployed whenever needed.

Instant shoot & transfer revolutionizes news gathering and broadcast

Instant shoot & transfer is one of the featured TD-LTE services and it wowed the visitors to the ITU’ s 145th anniversary celebration at the Expo Park on May 17th and the Shanghai NGMN Industry Conference in early June. Hailed as a pioneering move at the Expo, it also represents a technical revolution and a turning point in the history of news video.

Mr. Bill Huang, General Manager of the China Mobile Research Institute, remarked that this service was regarded by the media as a revolution in news gathering and broadcastin his keynote speech at the “TD-LTE Demo Night” on June 2nd at the Shanghai World Financial Center.

Traditional live broadcasting requires the construction of live broadcast facilities like a newsroom or a live broadcast truck. That is often demanding and difficult to do on site, take time to set up and test, and is vulnerable in emergencies. Cost is another major concern, for a set of integrated equipment costs a million or more USD, and with the satellite transmission link, the system really costs an arm and a leg.

By comparison, the TD-LTE-based instant shoot & transfer service replaces the newsroom or broadcast truck with portable integrated equipment that is easy to operate and maintain and costs much less. If we take O&M into account, instant shoot & transfer can definitely save a lot of labor and transmission link costs.

The TD-LTE HD instant shoot & transfer service was jointly demonstrated by China Mobile, Huawei, and other partners, attracting wide attention at the NGMN Industry Conference in the Shanghai World Financial Center. The TD-LTE HD instant shoot & transfer equipment consisted of professional HD cameras, audio and video codecs, and TD-LTE terminals. China Mobile put a large screen in the booth, which played the scenes captured by HD cameras. Video content was encoded and decoded locally and the video code streams were up to the HD standard, with no blurry images, frame loss, or mosaic. The delay of images from the camera to the screen ranged between one and two seconds, and, according to the on-site presenter, the delay was mainly caused by the codecs and would be less than 20ms if the videos were transferred from LTE network equipment. If the codec capability was further improved or a more professional codec was adopted, the end-to-end delay would be so small that you would hardly notice it, said the interpreter. Through the indoor TD-LTE network, the system can directly upload and download HD video code streams without any server platform. News can be collected, edited, and broadcast even while mobile, without location restrictions.

All roads lead to Rome

Skype, YouTube, and Facebook are moving into mobile applications and services. Smart terminals such as the iPhone, BlackBerry, OPhone, iPAD, and Kindle are leading the market. The app store has become a common model for mobile communications giants, and the entire industry is molding the mobile Internet era.

In the future, a more diverse range of mobile Internet terminals will be available for increasingly more users to enjoy better mobile Internet services. In addition, new-generation mobile broadband networks, mostly evolving toward LTE, will provide the infrastructure to guarantee that the mass users embrace the mobile Internet.

In December 2009, TeliaSonera, the largest telecoms operator in Scandinavia and the Baltic countries, launched the world’ s first commercial LTE network in Oslo and Stockholm supplied by Huawei and Ericsson respectively. According to data released by the Global Mobile Suppliers Association (GSA), there were 110 operators committed to LTE network deployments in 48 countries and regions as of June 2010, and 22 LTE networks will be in commercial service or at trial stages by the end of 2010. These operators include traditional GSM/CDMA operators such as Vodafone, T-Mobile, and NTT DOCOMO, CDMA operators like China Telecom and Verizon Wireless, and GSM/TD-SCDMA operators like China Mobile. LTE has no doubt become the common choice for most mobile operators in their migration to mobile broadband.

From the Shanghai Expo Park, TD-LTE’ s brilliant debut marks the beginning of China’ s journey toward LTE mobile broadband.


ZTE Achieves World’s First TD-LTE and 2G/3G Handover Interoperability Test [July 11, 2011]

TE Corporation (“ZTE”) (H share stock code: 0763.HK / A share stock code: 000063.SZ), a publicly-listed global provider of telecommunications equipment and network solutions, today announced that it has completed the industry’s first interoperability test (IOT) between TD-LTE terminals and GSM/UMTS/CDMA EV-DO networks.

This is the first IOT between a multi-mode TD-LTE terminal and non TD-LTE networks. The success of the test is significant for the entire TD-LTE ecosystem, proving that TD-LTE devices can work seamlessly with existing GSM, UMTS and CDMA EV-DO networks as well as with new LTE FDD and TD-LTE networks. It is expected to promote the convergence of TD-LTE and existing networks, and speed up TD-LTE network deployments.

“The test shows that devices for TD-LTE networks are close to market availability, and that ZTE’s extensive TD-LTE expertise ensures that our existing 2G and 3G networks are able to handle traffic from TD devices,” said Mr. Wang Shouchen, general manager of ZTE TD products.

Most operators have mature 2G/3G networks with huge numbers of subscribers. TD-LTE networks offer operators significant opportunities in terms of using available and often low-cost spectrum, but they need to work concurrently and seamlessly with existing networks and with the next generation of multi-mode devices.

Multi-mode terminals will allow the leading LTE operators to provide global roaming with existing 2G and 3G networks, thus reducing the market entry barriers for LTE development. TD-LTE multi-mode terminals have therefore been one of the core capabilities operators have been concerned about, and are an important indication of TD-LTE ecosystem maturity.

As of April 2011, ZTE had deployed TD-LTE trials and commercial networks for 25 leading global operators in 15 countries covering Europe, India, CIS, Asia-Pacific and Southeast Asia, and has been actively carrying out interoperability testing with other terminal vendors.

ZTE is also a major provider of LTE multi-mode terminals that meet the requirements of different network operators, and can provide a full range of LTE devices including data cards, inbuilt modules, tablet PCs and smart phones.

ZTE to deliver world’s first LTE TDD/FDD dual-mode infrastructure equipment to Hi3G [April 1, 2011]

Operator Hi3G plans to build world’s first LTE TDD/FDD dual-mode network in Sweden and Denmarkto offer next generation mobile broadband networks to its customers with data speeds of up to 100 Mbps.

29 March 2011, Shenzhen – ZTE Corporation (“ZTE”) (H share stock code: 0763.HK / A share stock code: 000063.SZ), a leading global provider of telecommunications equipment and network solutions, today announced the company will deliver LTE infrastructure equipment to operator Hi3G, which plans to build the world’sfirst LTE TDD/FDD dual-mode networks in Sweden and Denmark. As part of the deal, ZTE will also deliver 3G infrastructure equipment to upgrade the operator’s 3G network.

The delivered base stations will be based on ZTE’s Uni-RAN SDR (Software Defined Radio) technology, which enables Hi3G to support all viable mobile standards and frequency bands, housing both the upgraded 3G network and the two versions of LTE: TDD and FDD. The SDR technology also makes it possible for Hi3G to perform future upgrades of its infrastructure without acquiring new base stations.

Peder Ramel, CEO at Hi3G, said: “We have chosen ZTE for additional 3G 900/2100 rollout and for LTE mobile broadband networks in Sweden and Denmark because of the possibility to house three different mobile standards in the same physical infrastructure and the low cost of ownership. Furthermore, ZTE advanced LTE dual-mode solutions and quick consignment responses really meet our requirements.”

Zhu Jinyun, President of ZTE Europe and America, commented: “The agreement with Hi3Gfully demonstrates that ZTE has a great capability to provide solutions for end-to-end multi-mode convergence systems. It further strengthens our position in LTE in Western Europe and will be followed by additional LTE-infrastructure deals, which will be announced shortly.”

ZTE Corporation is a leading supplier in both the TDD and FDD markets. ZTE has worked on more than 20 LTE projects in high-end markets including Spain, the United States and Hong Kong, with established operators such as Telenor, CSL (under Telstra Group), Etisalat, SingTel, Commnet Wireless/NTUA, and China Mobile. ZTE has to date rolled-out 15 LTE commercial networks and over 65 LTE trials in Europe, North America, and the Middle East and Asia Pacific areas.

Thomas Granström, Managing Director for ZTE in the Nordics, said: “The deal with Hi3G signals a real breakthrough for ZTE in the advanced Nordic market, demonstrating our capabilities in providing high speed mobile broadband network infrastructures. The agreement with Hi3G comes on top of a successful year, including several handset launches throughout the region and additional infrastructure deals with Nordic operators in foreign markets.”

Hi3G builds world’s first LTE TDD/FDD dual-mode network

Hi3G expects to develop its Swedish and Danish networks for mobile broadband during 2011and will introduce LTE technology with very high data speeds of up to 100 Mbps for its customers.

Hi3G will exploit its spectrum resources by rolling out two versions of LTE. The two versions are usually referred to as Frequency Division Duplex (FDD) and Time Division Duplex (TDD). The main benefit of the TDD version is that it can make full use of TDD spectrums to maximize data throughput and enhance user experience. Hi3G has acquired 50MHz of TDD spectrum in Sweden and 25 MHz of TDD spectrum in Denmark.

The TDD version of LTE is also used in other parts of the world, for example China. The use of TDD LTE by China will facilitate the world-wide availability of TDD LTE terminals.

The E-Plus Group, China Mobile and ZTE collaborate for TD-LTE field trial in Germany [Feb 17, 2011]

The E-Plus Group will launch a TD-LTE field trial in Germany in Q1 2011. The trial is based on 2.6 GHz spectrum that E-Plus acquired in the German spectrum auction. China Mobile, with its leading position and rich experience in the operation and maintenance of TDD networks, will provide technical support to this trial. ZTE will provide base stations developed on the advanced SDR platform and co-siting solution of LTE FDD/TD-LTE, which is a breakthrough in the industry.

The E-Plus Group is the third largest mobile network operator in Germany. The E-Plus Group has been one of the most innovative mobile operators for years. After revolutionizing the mobile voice market for larger user groups E-Plus is now opening the mobile data market for the masses with low-priced data tariff schemes and the roll-out of a HSPA+ network with speeds up to 21.6 Mbps. On top of the high speed mobile data network roll out, E-Plus will now test TD-LTE in the field. The E-Plus Group is one of the founding members of the Next Generation Mobile Networks (NGMN) Alliance.

The E-Plus Group and ZTE agreed and scheduled a field trial program for 2011consisting of several streams to investigate the capabilities of ZTE’s commercial SDR equipment and best utilisation of the spectrum holdings of E-Plus in 1.8 GHz, 2.1 GHz and 2.6 GHz, both TD-LTE and LTE FDD.

China Mobile claims the largest number of mobile subscribers in the world. From TD-SCDMA to TD-LTE, China Mobile is devoted to promoting TDD industry being equipped with rich experience in TDD network deployment. Furthermore, China Mobile is pro-active in TDD technology globalization and the convergence of the TD-LTE and LTE FDD industry by seeking cooperation with overseas operators in Europe, Asia, America and Australia.

With the joint effort of the E-Plus Group, China Mobile and ZTE, this trial will not only demonstrate the latest progress of TD-LTE/LTE FDD convergence in standards and industry development, but also lay an excellent ground for the full commercialization of TD-LTE.

ZTE Secures 18 TD-LTE Contracts Globally [Feb 16, 2011]

ZTE Corporation (“ZTE”) (H share stock code: 0763.HK / A share stock code: 000063.SZ), a leading global provider of telecommunications equipment and network solutions, today announced it had secured 18 TD-LTE contracts globally, cementing its place as an international and first-class TD-LTE equipment provider.

These contracts are for trial and commercial networks in 12 countries across Europe, the Commonwealth of Independent States (CIS, or the former Soviet Republics) and the Asia Pacific region, including India.

Since entering the TD-LTE field in 2005, ZTE has achieved sustainable development on TD-LTE wireless systems, chipsets and terminals. So far it has established eight TD-LTE R&D centers in America, Europe and the Chinese cities of Shenzhen, Shanghai, Xi’an and Nanjing. The company has over 4000 elite researchers developing wireless systems, core network products and terminal products simultaneously.

Each year ZTE commits 10% of its revenue developing frontier technologies. It now owns 7% of the world’s essential LTE patents, and is one of the companies holding the largest number of independent Intellectual Property Rights (IPR) in the world.

ZTE is actively cooperating with various parties in the TD-LTE ecosystem. The company collaborates on Interoperability Tests (IOT) with mainstream chipset providers such as Qualcomm, Innofidei, Altair, Sequans and ST-Ericsson. It also works to promote the development of the TD-LTE platform and standards. In October 2009, ZTE teamed up with Innofidei to successfully demonstrate the industry’s first multi-vendor TD-LTE high-definition video service at ITU Telecom World 2010 in Geneva.

At the end of 2010, ZTE was the first in the industry to launch Qualcomm chipset based TD-LTE terminals and achieved a download rate of nearly 100Mbps.

In January 2011, consulting company Frost & Sullivan released a research report on the Time-Division Duplex (TDD) market, evaluating the competitiveness of companies in the TD-LTE field based on four criteria including technical accumulation, product convergence, product progress and system openness. In this report, ZTE was ranked No.1 in terms of competitiveness.

ZTE Launches World’s First Commercial TD-LTE Base Stations [June 7, 2011]

ZTE Corporation (“ZTE”) (H share stock code: 0763.HK / A share stock code: 000063.SZ), a leading global provider of telecommunications equipment and network solutions, today announced that it has launched the industry’s first commercial TD-LTE base stations: BBU- B8300 and RRU- R8962. The debut of the two base stations is timely to help accelerate TD-LTE industry commercialization.

ZTE’s B8300 TD-LTE base station is based on ZTE’s SDR unified platform and can be upgraded from TD-SCDMA mode to TD-LTE or TD/TD-LTE dual mode. It fully supports a smooth evolution of carrier networks to LTE and lowers their total cost of ownership.

ZTE’s R8962 TD-LTE base station supports two channels with 20W transmission power each – the highest transmission power and power efficiency in the industry. It incorporates compact size, the most lightweight design in the industry, and meets the growing industry demand for energy savings and emission reduction. Operators will benefit from its innovative product features for multi-mode functions of TD/TD-LTE, as well as its multi-band 2.3/2.6 GHz and multi-scenario indoor/outdoor applications.

To support the ever-growing needs for next-generation network infrastructure, ZTE has deployed more than 250,000 SDR base stations across the globe, including in mainland China, Hong Kong, India and Chile. The company successfully constructed a TD-LTE network for the Shanghai World Expo Press Center, and the company’s 2G/3G dual-mode base station built upon the SDR platform was nominated for a GSMA Global Mobile Award in 2009.

ZTE has taken the lead in LTE development and has achieved significant breakthroughs in the industry. To date, the company has deployed five commercial LTE networks and built 40 LTE trial networks for leading telecom operators in Europe, North America, Asia-Pacific and MEA. With an aim to advance the telecommunications market into 4G technologies, ZTE will continue to drive innovation and introduce market-leading and cost-efficient solutions to the market.

ZTE Completes the World’s First TD-LTE S1/X2 Interface Conformity Test [June 1, 2010]

ZTE Corporation (“ZTE”) (H share stock code: 0763.HK / A share stock code: 000063.SZ), a leading global provider of telecommunications equipment and network solutions, and China’s Ministry of Industry and Information Technology (MII) today announced they have completed the world’s first S1/X2 Interface Conformity test, an important development under MII’s initiatives for the deployment of TD-LTE.

ZTE was invited by MII to conduct the trial in advance of mass-scale system testsdue to the company’s leading position and rich experience in TD-LTE. The test was a success and passed all requirements set forth by MII for the S1/X2 Interface Conformity Test, making ZTE the first in the world to successfully complete the related trials.

ZTE has been actively involved and participated in TD-LTE tests organized by MII and China Mobile. The Company has realized many industry firsts in TD-LTE industry trials. It achieved TD-LTE’s highest theoretical peak download rate in November 2009. In December 2009, ZTE became the first vendor to pass the essential test set for TD-LTE single systems organized by the MTNET Lab of MII followed by the industry’s first field tests.

In addition, in January 2010 ZTE passed the TD-LTE field test held by MII making it the first in the industry to submit a TD-LTE field test report to The LTE/SAE Trial Initiative(LSTI). Subsequently, ZTE successfully completed an indoor MIMO performance test in cooperation with China Mobile, underlining its key role in promoting TD-LTE industry-chain development.

Within LTE network infrastructure, the S1 interface is the communications interface between LTE eNB (base station) and EPC (packet core network), while the X2 interfaces between eNB and eNB. The success of the S1/X2 Interface Conformity test validates that ZTE’s TD-LTE system, including its wireless and core network, fully comply with 3rd Generation Partnership Project(3GPP)standards, and has laid down a solid foundation for the test of S1/X2 IOT.

ZTE has taken the lead in the TD-LTE development and has attained significant achievements in the industry. To date, ZTE has deployed five commercial LTE networks and built 40 LTE trial networks for leading telecom operators in Europe, North America, Asia-Pacific and MEA. With an aim to advance the telecommunications market into 3.5/4G, ZTE will continue to drive innovation and introduce innovative and cost-efficient solutions to the market.

ZTE Partners with CMCC for Ground-Breaking TD-LTE Indoor MIMO Networking Performance Test [March 30, 2010]

ZTE Corporation (“ZTE”) (H share stock code: 0763.HK / A share stock code: 000063.SZ), a leading global provider of telecommunications equipment and network solutions, today announced that, together with CMCC (China Mobile Communications Corporation), it has successfully completed a TD-LTE indoor MIMO networking performance test in Beijing– producing the world’s first batch of TD-LTE performance evaluation data on indoor single/dual path cell throughput. The testing also produced data for indoor multi-UE circumstances.

The test evaluated the construction solution of indoor distribution systems, including whether a two-path system can achieve significant better performance than a single path system under different scenarios and user distributions. Organized by CMCC, ZTE based its results on comparative tests under several different scenarios. The testing found that, under diversified testing circumstances, a TD-LTE two-path indoor distribution system downlink throughput does show dramatic improvements compared with single path indoor distribution system. The data is valuable for the industry for TD-LTE networking construction and efficiency.

ZTE and CMCC partnered earlier this year for the Huairou field test organized by MIIT(China’s Ministry of Industry and Information Technology). ZTE is also taking great initiative in studying and testing MIMO utilization probability in indoor open environments.

ZTE has established itself as a leader in the TD-LTE industry through tests and partnerships across the globe. ZTE and CMCC will jointly deploy a TD-LTE operation network for the Expo News Centre at the World Expo Shanghai 2010. The TD-LTE network will provide high-speed wireless network services to reporters and expo staff from around the world. To date, ZTE has successfully engaged in over 10LTE projects worldwide with leading telecoms including Telstra CSL, Telefonica, SingTel, CMCC, and more.

ZTE Achieves Industry-High TD-LTE Network Downlink Speed of 130Mbps [Dec 11, 2009]

ZTE Corporation (“ZTE”) (H share stock code: 0763.HK / A share stock code: 000063.SZ), a leading global provider of telecommunications equipment and network solutions,today announced that it has successfully demonstrated its TD-LTE network technology and achieved a downlink speed of 130Mbps, the highest level in the industry. ZTE is the first company to reach the theoretical limit of TD-LTE throughput in downlink. Utilizing third-part terminal testing tools, ZTE conducted the tests using ZTE system products including EPC, eNodeB, etc in Guangzhou in November.

ZTE has created a simple and smooth transition path for operators to move to LTE through its mature and stable SDR Base Stations. Networks can be upgraded from TD-SCDMA to TD-LTE or to TD-S/TD-LTE dual-mode through a simple software upgrade, saving operators time and money. At the present time, there are more than 200,000 sets of ZTE SDR products running throughout the world, including in China mainland, Hong Kong, India, Chile and other countries. ZTE’s SDR platform Base Station was honored with a prestigious nomination by GSMA Global Mobile Award for the Best Network Technology

In May 2010, ZTE and China Mobile will jointly deploy a TD-LTE network at the Expo News Center for the World Expo Shanghai 2010. The TD-LTE network will provide high-speed wireless network services, enabling staff and reporters around the world to experience the excellent voice, video and data services of LTE technology during the World Expo.

Based on ZTE’s continuous investment and development in the TD-SCDMA field, ZTE has made great strides in TD-LTE field. During a TD-LTE proof of concept (PoC) test organized by China Mobile, Vodafone and the Ministry of Industry and Information (MII), ZTE scored many of the top marks in the industry testing. As the first vendor globally to report testing results for LTE TDD IODT technology to the Long Term Evolution/System Architecture Evolution Trial Initiative (LSTI) in September 2009, ZTE is effectively driving the development of IODT between the TD-LTE industry and chip manufacturers.

ZTE has more than 2,000 engineers and experts dedicated to the innovation and network development of LTE technology. ZTE is a leading pioneer in LTE terminal research and development, working with operators to driving the global adoption of LTE technology.

ZTE is First to Pass Third-Party UE TD-LTE Test [May 13, 2009]

ZTE Corporation (“ZTE”) (H share stock code: 0763.HK / A share stock code: 000063.SZ), a leading global provider of telecommunications equipment and network solutions today announced that it is the first company to successfully complete and pass the TD-LTE Phase I test together with key industry players including China Mobile, Vodafone and the Ministry of Industry and Information of China on April 15, 2009. The TD-LTE test measures high bandwidth network capacity.

This significant achievement was made known during yesterday’s NGMN (Next Generation Mobile Network) Conference held in Beijing, China. As one of the key highlights of the conference, TD-LTE attracting numerous key industry participants including China Mobile, Vodafone and other leading members of NGMN.

In ZTE’s TD-LTE Phase I test, the results indicated that the downlink sector reached the theoretical peak rate of 39Mbps with a 10M bandwidth, at the same time, ZTE became the first company in the industry to realize 20M bandwidth support. In the trials, ZTE adopted third party test UE (User Equipment) and the downlink peak rate attained TM500’s upper limit of 61.228 Mbps. Upgradable through terminal, the system is designed to support a downlink rate of up to 82.3 Mbps in the future.

Adopting a unified SDR business platform for its system equipment in the test, ZTE is the first vendor to feature pre-business EPC (Evolved Packet Core) to complete the total system tests, highlighting its leading position in commercial applications. As an industry first to use third party UE to complete the tests, ZTE achieved its expected trail results, including zero fault, zero malfunction and 100% connection rate: another technology breakthrough that highlights ZTE’s winning customer offerings with its excellent system stability.

This TD-LTE test also makes ZTE the first company to complete a performance test under a 350Km/h high-speed mobile channel model, reaching the best theoretical value. In fact, in May 2009, ZTE was the first industry vendor to pass China Mobile Institute’s GSM/TD-SCDMA/TD-LTE joint platform testfurther underlining its leading edge in the TD-LTE area.

To date, as one of the leading advocates of the TD industry chain, ZTE has a taskforce of over 3,200 TD R&D engineers with more than 900 devoted to TD-LTE. The Company has submitted more than 400 LTE papers to the 3GPP Conference to further propel and inspire industry development. Through continuous and extensive investments in R&D and manpower, ZTE has been at the forefront of LTE fully demonstrating its leadership in both LTE and TD-LTE.

ZTE Stakes Out Its LTE Credentials [May 20, 2011]

China’s ZTE Corporation has made a huge investment in developing TDD-LTE equipment and solutions, and now it is looking to reap the benefits by winning contracts in the European and American markets.

“Our target is to achieve over 15 commercial LTE contracts in Europe in 2011,” says Li Jian, ZTE’s general manager, CDMA and LTE Product Line. It’s a bold statement of intent and a measure of the increasing confidence the Chinese telecommunications equipment and network solutions provider now has on the world stage. The reasons for this confidence are threefold, according to Li Jian. “It is because ZTE will continue to contribute 10% of its revenue to investment in LTE development. We already have 4,000 engineers and research staff, so this is a very special team devoted to LTE development.”

ZTE has spent a total of RMB 13 billion over the last two years on R&D alone, and the company maintains 15 R&D centres in Sweden, the U.S., France, India, Shenzhen, Shanghai and Beijing.

Li Jian says: “Also, ZTE is very mature in LTE knowledge with a full end-to-end LTE solution and technology. ZTE is the leading software defined radio (SDR) vendor. We came up with SDR, so we think we have a strong ability to lead on this new platform and that’s why we are confident we can win 15 contracts in Europe this year.”

“The third reason ZTE is confident it will hit this target,” she continues, “is that ZTE can customise its LTE solution to whatever the operator’s requirements are. So, operators can deploy ZTE’s LTE equipment on top of their existing infrastructure. This will save on deployment costs and maintenance costs in the evolution from one generation to the next.”

Opinions vary, depending on  what is being measured and how, but a report in February by Open Vista Consulting ranked ZTE among the top three vendors for LTE infrastructure, alongside Ericsson and Nokia Siemens Networks, with 21% of the LTE market.

ZTE is beginning to ride a wave of interest in TDD-LTE, the alternative to FDD-LTE, which is being heavily promoted by the world’s largest operator, China Mobile. The manufacturer is one of several companies that have worked closely with China Mobile over the last three years to develop TDD-LTE.

This commitment has led to a startling jump in influence in terms of the number of international patent applications from ZTE (and indeed, China generally). According to the World Intellectual Property Organisation, ZTE jumped from 23rd place to second in 2011 for international patent applications.

By the end of December 2010, ZTE had a total of 1,863 patent applications registered. It has declared 235 essential LTE patents to ETSI, which accounts for 7% of the total so far. This has propelled ZTE into becoming one of the main holders of basic LTE patents.

The continued investment in R&D has also begun to translate into wider commercial success beyond China despite the economic downturn of the last two years. The percentage of overseas revenue grew from 44% in 2006 to 54.1% in 2010 (US$5.7bn).

Global revenue from principal operations reached US$10.6bn in 2010, up 21% on 2009. Net profit was US$490.7m. According to a Frost & Sullivan report “Insights on 2010 Market Performance”, ZTE had the highest compound annual growth rate among the top vendors―28% between 20082010 and 37.4% between 20062010. It secured contract sales worth up to RMB100 billion in 2010.

“We have 15 commercial contracts and 65 trials around the globe,” reports Li Jian. “But this year ZTE will focus on the high-end markets, such as Europe and the USA. We are looking for deeper and more intensive penetration of these markets.”

Li Jian says that some of the contracts will be undertaken by ZTE itself, while others will be won in partnership. But ZTE will provide the end-to-end solutions.

ZTE showcased its range of LTE base stations at Mobile World Congress in February as well as a number of innovations. Along with its distributed base stations, it also introduced what it claims is the industry’s first all-in-one micro base station, as well as the all-in-one indoor/outdoor macro base station.

The rollout of LTE is beginning to take off in Europe and America, but it is still early days. “In 2009, there were some LTE deployments in European and US markets, but it grew very slowly,” says Li Jian.

“But in 2010, we found that in the second half the trials by networks of LTE were becoming rapid. This year, the operators in Europe and the USA will increase the development of LTE, but it will not reach the explosion point.”

Problems with the availability of frequency and licences for LTE are delaying deployment. The UK 800MHz and 2.6GHz auction will not take place until 2012, for example. The lack of LTE-enabled devices other than dongles for laptops is also slowing down the arrival of LTE. But 2012 is likely to be the year it really takes off.

“Different countries will have different situations,” says Li Jian. “It’s true that some, if not most, are still benefitting from their 2G and 3G networks, but the development of LTE will not be stopped now. The advantages of fast mobile broadband will benefit the operators and enhance their operational capabilities.”

The advantage for ZTE is that over the last year many operators have started to show a keen interest in the TDD-LTE option. FDD and TDD are very similar and can share the same chip. However, FDD uses two frequency bands and TDD just one.

There is more TDD frequency available, it is less used and generally speaking cheaper to get for the operators. And for WiMAX operators, it is easier to convert to TDD-LTE than FDD-LTE should they wish to do so. Hence, there is growing attraction of TDD for mobile carriers. What ZTE’s SDR platform provides is a multimode platform that allows operators to choose FDD or TDD as and when they are ready to do so. But as Li Jian points out it does more than that―it can support the existing technologies too.

“Our base band units (BBUs) connect all the different technologies, so they can support GSM, UMTS, TD-LTE, FDD-LTE and WiMAX in one platform,” says Li Jian, “and that will provide a big cost saving for operators.”

Operators will continue to run their 2G and 3G networks in conjunction with LTE. But ZTE’s SDR platform allows them to invest in new network infrastructure now that will cut network CAPEX and OPEX and future proof them for LTE when it comes on line.

“SDR is a uniform platform―you can do anything on it. You can satisfy any operator requirement, so that will help them save money and satisfy their business development needs at the same time. We try to reuse existing facilities and systems as much as possible,” says Li Jian.

An example of this is the work ZTE has done with Hong Kong mobile operator CSL. In November 2010, CSL launched a commercial LTE/DC-HSPA+ network. “CSL has two GSM, two UMTS and two LTE bands, but it is all based on one platform―you no longer need separate big sized GSM units,” says Li Jian.

The availability of a wide and affordable range of LTE-enabled devices is also critical for the future of the LTE market. But Li Jian says that the development of terminals is growing very fast, “so ZTE will try to develop and provide a total solution to solve the problem and make it easier for operators.”

Besides terminal products, equipment and services, ZTE has invested in chip development. At the end of 2010, ZTE was the first to launch a Qualcomm chipset based on TDD-LTE terminals and achieved a download rate of nearly 100Mbps. “It is this kind of thing that makes ZTE different from other vendors,” says Li Jian.

The rollout of LTE may be protracted, especially in Europe, but ZTE looks to be well positioned to grab a large share of the market, if the number of operator trials it is picking up is anything to go by.

Recent ZTE technology advances showcased at MWC:

LTE-A CoMP prototype: ZTE unveiled its LTE Advanced coordinated multi-point (CoMP) transmission prototype. It incorporates a number of key technologies, such as carrier aggregation, multiantenna enhancement, relay technology and multipoint transmission. CoMP technology ‘dramatically increases’ throughput on the edge. Commercial LTE-A products are due out in 2012.

Multiple Access Binding (MAB) solution: Dubbed the all-join, the MAB solution shows how a UE can bind multiple RATs simultaneously. ZTE demonstrated the binding of LTE and Wi-Fi on a single UE through unified authentication. It then bound multiple access technologies using integrated serving gateway (ISGW) built on the advanced service router platform. MAB is being touted as an effective way to solve data storm issues and provide high quality services by introducing synergy between their access technologies.

C-RAN wireless networking solution: ZTE claims that the cloud of radio access network (C-RAN) solution, first introduced by China Mobile, will lower the total cost of ownership of wireless networks by 40%. It involves the development of a new generation of wireless access networks using centralised processing, collaborative radio, real-time cloud infrastructure, clean system (green wireless access network architecture) and cloud computing.

III. Ericsson (+ acquisition of divested Nortel assets strategic for Ericsson)

CEO sees markets beyond traditional telecom [May 5, 2011]

  • Determined to grow faster than market in traditional segments
  • Addressable market valued at USD 350 billion
  • New customer segments to address

Today at Ericsson’s (NASDAQ:ERIC) Capital Markets Day in Stockholm, President and CEO Hans Vestbergmade remarks on the telecom industry and Ericsson’s position.

“We have just seen the beginning of the massive data growth, driven by smartphones and other mobile devices. These new devices provide operators with new charging capabilities. As a consequence, we are beginning to see signs of changed operator tariffs and pricing models aligned to consumer needs, especially for mobile broadband services and data usage. It’s important for us to follow this development,” Vestberg said.

Ericsson estimates show that the number of mobile broadband users will increase from today’s 400 million to 3.5 billion in 2015.

“These fundamental industry drivers require operators’ to focus on network quality and efficiency. In addition, in the developed world, where the networks have been up and running for quite a long period, we will see operators modernize their infrastructure not only to meet increased data usage, but also to reduce power consumption and use frequencies better. These are challenging operations, requiring deep technology understanding and services capabilities as well as insights on advanced business support systems and understanding of consumer needs in order be successfully performed.”

Vestberg continued by stating that the operator environment is becoming more complex in competition for consumers who are becoming increasingly advanced and demanding.

“We will see new business models emerging and so called coopetition among operators, where they will share platforms and build scale together around applications.”

Vestberg, who took on the position as President and CEO as of January 1, 2010, continued by elaborating on Ericsson’s industry leading position in mobile networks, services and multimedia as well as platforms and handsets via the joint ventures ST-Ericsson and Sony Ericsson. Vestberg said that converged networks is an area where the company intends to continue investing.

“We see good long-term growth opportunities in our traditional segments and we are determined to further strengthen our position and continue to grow faster than the market. Less than 5% of the world’s population has access to 21 Mbit/s or more in the air, at least 1.5 million installed GSM radio base stations must be replaced and in addition we see continued need for services in fields such as consulting, system integration and managed services. We estimate that our addressable market, including joint ventures, is worth USD 350 billion.”

“However, we are not satisfied with our position today and we see new markets to address. The capabilities we have in place today enable us to address customers also beyond traditional telecom operators such as cable and TV-companies, governments, healthcare, transport and utilities. These are industries where there is a huge need for telecommunication services,” Vestberg stated.

Vestberg was also joined by Mr. Manoj Kohli, CEO of Bharti Airtel. Mr Kohli attended via a video link from India and elaborated on the challenges Bharti meets in India where the number of mobile subscriptions grow by 20 million only in March, making India the fastest growing market in the world.

Mats H Olsson, head of Ericsson in China and North East Asia as well as Angel Ruiz, head of Ericsson North America, also joined via video link.

“Mainland China added more than 100 million subscriptions last year and we expect similar numbers in 2010”, said Mats H Olsson. “Non-voice revenues now make up 30% of Chinese operators’ total revenues and one of our focus areas for this year is deployment of TD-LTE in China and LTE in Japan and Korea.  We also see further opportunities to increase our GSM footprint in mainland China”.

“We have taken every LTE-contract announced in North America and with the acquisition of Nortel we now have access to 50% of the marketwe couldn’t approach previously. We take nothing for granted, but we are ready to move to the next level and achieve even greater market leadership”, said Angel Ruiz,

Other Ericsson executives on stage were: Executive Vice President and CFO Jan Frykhammar, Chief Strategist Douglas L Gilstrap, Chief Technology Officer Håkan Eriksson, Executive Vice President and head of business unit Networks Johan Wibergh, head of business unit CDMA Mobile Systems Rima Qureshi, head of business unit Global Services Magnus Mandersson and head of business unit Multimedia Jan Wäreby.


Bio and photos of Ericsson Group Leadership Team

Read more about the joint ventures Sony Ericsson and ST-Ericsson

Our multimedia content is available at the broadcast room: www.ericsson.com/broadcast_room

Ericsson is the world’s leading provider of technology and services to telecom operators. Ericsson is the leader in 2G, 3G and 4G mobile technologies, and provides support for networks with over 2 billion subscribers and has the leading position in managed services. The company’s portfolio comprises mobile and fixed network infrastructure, telecom services, software, broadband and multimedia solutions for operators, enterprises and the media industry. The Sony Ericsson and ST-Ericsson joint ventures provide consumers with feature-rich personal mobile devices. 

Ericsson is advancing its vision of being the “prime driver in an all-communicating world” through innovation, technology, and sustainable business solutions. Working in 175 countries, more than 80,000 employees generated revenue of SEK 206.5 billion (USD 27.1 billion) in 2009. Founded in 1876 with the headquarters in Stockholm, Sweden, Ericsson is listed on OMX NASDAQ, Stockholm and NASDAQ New York.


Ericsson received award for best contribution to LTE R&D [May 23, 2011]

  • Ericsson received Informa LTE Award at LTE World Summit in Amsterdam
  • Recognized for the best contribution to research and development for LTE
  • Recognition for Ericsson’s strong R&D asset

Ericsson envisions a networked society where everything that can benefit from a connection will have one. LTE is a key enabling technology for making that shift. Hence, relevant and continuous investments in R&D within LTE continue to be essential for Ericsson.

On Tuesday May 17, Ericsson received Informa’s LTE Award at LTE World Summit in Amsterdam for best contribution to R&D for LTE. The award recognizes the contribution towards the research and development of LTE regarding investments made into R&D and research projects undertaken and how the R&D activities have had a positive impact on making LTE commercially successful.

As a result of its extensive investments in R&D and field experience of LTE deployments, Ericsson has had the highest impact on the released LTE specifications and expects to hold 25 percent of all essential patents in LTE. Ericsson has been trusted to supply the large majority of the commercial LTE networks globallyincluding the world’s first commercial LTE network as well as the world’s largest commercial installation of LTE to date. LTE today covers 200 million people and Ericsson networks enable 130 million of those to enjoy a LTE service.

To secure a fast and smooth commercial rollout, Ericsson focuses on supporting user experience being the preferred and largest LTE chipset verification partner and introducing Self Organizing Networks (SON) in the LTE environment. The Ericsson solution for Self Organizing Networks (SON) is crucial for the quick deployment of commercial LTE, offering customers standardized “plug and play” networks with a high degree of automation, saving time while improving performance.

Including all technology areas, Ericsson holds a total of 27 000 granted patents, employs more than 18,000 persons in R&D units spread over 17 countries.

Ericsson wins LTE standards award [May 27, 2010]

Ericsson Research has won an award for the best contribution to LTE standards at the Informa LTE Awards 2010, adding another feather in its 4G technology cap.

Held in conjunction with the LTE World Summit 2010 in Amsterdam that ended on May 19, the LTE Awardscelebrated growth and success across the industry.

Ericsson has had a leading role in developing LTE as a 4G technology from its initial research cooperation to the finalized releases of the standard. It beat competitors in the Best Contribution to LTE Standards category, in which contenders were required to state the contribution they have made to the development of standards and specifications for LTE technology.

“It is really great that our contribution has been acknowledged,” says Mikael Höök, director of Radio Access Technologies within Ericsson Research. “Before the standardization even started we were very active in defining the framework for it. Once it started within 3GPP, we have been very active and shown a huge commitment to it.”

“We need to remember that LTE is continuously evolving and will do so for many years, and that includes standardization of new features and new functionalities in LTE. To maintain our leadership, we need to remain focused and innovative, evolving standards and ensure that our products are unique to make sure we have the solutions that operators are asking for,” he says.

David Astély, Joakim Bergström, Erik Dahlman and Stefan Parkvall from Ericsson Research were acknowledged for their roles in producing high-quality LTE specifications, enabling an early commercial launch of LTE mobile broadband. This has helped generate global industry trust and commitment to the LTE technology.

Next generation LTE, LTE-Advanced or LTE Rel-10 is the next step in radio access technology [Dec 21, 2010]

Next generation LTE, LTE-Advanced

Authors: Stefan Parkvall, Anders Furuskär, Erik Dahlman

Whatever the name – next generation LTE, LTE-Advanced or LTE Rel-10 – the next step in LTE evolution allows operators to introduce new technologies without putting existing investments at risk.

LTE radio access technology is continuously evolving to meet the requirements of regulators, operators and users. The first fully commercial and operational 4G mobile broadband systems, currently being deployed, are based on the first release of LTE, 3GPP Rel-8, which was finalized in 2008. Rel-9, finalized at the end of 2009, added support for broadcast/multicast services, positioning services, and enhanced emergency call functionality, as well as enhancements for downlink dual-layer beam forming.

Today, the main focus of 3GPP is the next generation of LTE evolution, Rel-10, often referred to as LTE-Advanced. Rel-10 further extends the performance and capabilities of the LTE radio access technology, and meets all of the requirements for IMTAdvanced as defined by ITU.

In October 2010, ITU completed the assessment of submissions for global 4G mobile wireless broadband technology, LTE Rel-10 (submitted by 3GPP) was one of two technologies accorded the official designation of IMT-Advanced.

This article provides a brief introduction to IMT-Advanced, followed by a description of the extensions to LTE introduced as part of 3GPP Rel-10. It concludes with system-level results that illustrate the ability of LTE Rel-10 to fulfill and even surpass the IMT-Advanced requirements.

The complete article (pdf)

Long Term Evolution (LTE) – An Introduction [June 1, 2009]

The internet generation is becoming used to having broadband access everywhere. Of the estimated 3.4 billion people who will have broadband by 2014, about 80 percent will be mobile broadband subscribers – and the majority will be served by High Speed Packet Access (HSPA) and Long Term Evolution (LTE) networks.

People can already browse the internet or send e-mails using HSPA-enabled notebooks, replace their fixed DSL modems with HSPA modems or USB dongles, and send and receive video or music using 3G phones. With LTE, the user experience will be even better. It will enhance more demanding applications such as interactive TV, mobile video blogging, advanced games and professional services.

In capacity terms, LTE already meets key 4G requirements, providing downlink peak rates of at least 100Mbit/s. Its infrastructure is designed to be as simple as possible to deploy and operate, through flexible technology that can be used in a wide variety of frequency bands.

LTE will also be available in a wide range of terminals; not only in next-generation mobile phones but also in notebooks, ultra-portables, cameras, camcorders, mobile broadband routersand other devices that benefit from mobile broadband.

Download White Paper

Long Term Evolution (LTE) – An Introduction (pdf)

Strategic cooperation with Datang for mobile technology development in China [April 20, 2010]

      • Richer mobile communications for millions of Chinese consumers
      • Research, development and commercial cooperation within TDD technology

Ericsson (NASDAQ:ERIC) has signed a memorandum of understanding to establish strategic cooperation with Datang Telecom Technology & Industry Holdings Co. Ltd. (Datang) to jointly develop advanced TDD solutions, with the goal to deliver richer mobile communications to consumers in China and around the world.

As part of the memorandum of understanding, Ericsson will start integrating Datang’s current best-in-class TD-SCDMA radio access network equipment into its own 3G mobile communications offering.

More than six million mobile users in China are already enjoying mobile services through this technology. TD-LTE being the next generation of TD-SCDMA technology is also being tested pre-commercially to satisfy the growing appetite for higher speed and richer applications of the Chinese mobile subscribers in due time.

Ericsson set up a joint research center with Datang in Beijing as early as January 2008 to carry out research cooperation in TDD technology. The strategic cooperation formed now takes the relationship between the two parties to a substantially new level.

The strategic cooperation aims to leverage Ericsson’s leading position in global mobile communications, its unique experience from global LTE commercial deployment and its common platform for FDD and TDD, as well as Datang’s industry-leading expertise in TDD technology. Such move will increase the industrialization capabilities of TDD solutions by achieving economies of scale, improve the interoperability of operators’ 2G/3G/4G networks, and provide support to a successful commercial launch of TD-LTE in China in the near future.

“Leveraging our global leadership position in LTE, we have been firmly committed to evolving TD-SCDMA to TD-LTE,” said Mats H Olsson, Head of Region China & North East Asia of Ericsson. “Now we are further strengthening that commitment by this strategic cooperation with Datang. Our promise remains the same: we will always strive for providing the best TDD products and services to the Chinese consumers and to the world.”

Chen Shanzhi, Vice President and CTO of Datang Telecom Technology & Industry Group said: “Ericsson is the world-renowned telecom solutions and services provider. The cooperation between Ericsson and Datang to jointly develop TDD products and solutions demonstrates the recognition of Datang’s innovative R&D results, industrialization and market capabilities in the TDD field from mainstream telecom suppliers in the world. We believe that our joining forces will drive the globalization of TD-SCDMA and play an important role in the industrialization of TD-LTE in the long run.” Chen Shanzhi continued, “The strategic cooperation that we establish now will help both parties to fully leverage on our respective resources so that we can together provide products and services that meet the requirements of China Mobile.”

Datang Telecom Group is the initiator of the 3G mobile communication TD-SCDMA international standard, the owner of its core intellectual property rights and an important promoter of its industrialization.

Ericsson supplies largest LTE network [Dec 14, 2009]

TeliaSonera has launched the world’s first and largest commercial Long Term Evolution (LTE) service in Stockholm, supplied by Ericsson. This historic rollout was completed well ahead of plan on December 14, 2009. TeliaSonera’s mobile broadband commercial network in Stockholm is the fastest and largest in the world to date.

Carl-Henric Svanberg

Carl-Henric Svanberg, President and CEO of Ericsson, says he is excited about this historic moment: ”The new era of mobile broadband has just begun today. With LTE, so-called 4G, your mobile broadband experience is moving to unequalled levels. The LTE speed gives you an absolutely effortless feeling of broadband access.”

Kenneth Karlberg, President and Head of Mobility Services, TeliaSonera says: ”We are very proud to be the first operator in the world to offer our customers 4G services. Thanks to the successful cooperation with Ericsson we can offer 4G to our customers in Stockholm earlier than originally planned.”

LTE, the next generation of mobile communication technology, is designed for transferring huge amounts of data in a most cost and energy efficient way, optimizing the use of frequency band and realizing fiber-like access speed over the air. With decreased latency, consumers can now enjoy whatever service is available online – high definition (HD) video, network games, you name it – effortlessly and on the move.


Downtown Stockholm is now covered by the Ericsson LTE network, making it the largest LTE deployment to date. TeliaSonera’s subscribers are the first to have access to the LTE service by commercially available Samsung LTE dongles.

Ericsson has completed commercialization of its LTE products, and larger-scale production is ready for further deployment. Interoperability has been tested thoroughly with many different devices in different

LTE rollout for AT&T in the US [Feb 10, 2010]

  • AT&T to build LTE network
  • Ericsson named as key supplier for LTE equipment
  • Commercial launch scheduled to begin 2011

LTE is the latest step in a wireless evolution that Ericsson (NASDAQ: ERIC) began with AT&T over two decades ago and is part of AT&T’s ongoing efforts to innovate and invest in mobile broadband.

AT&T serves more than 85.1 million customers and has seen mobile broadband growth of more than 5,000 percent over the past three years. Smartphones are just one example of innovation made possible by investment in mobile broadband.

After extensive testing of equipment from multiple suppliers in lab and field environments, AT&T chose to extend its existing relationship with Ericsson for LTE deployment. The agreement also complements AT&T’s strategy to continue to boost the speed and performance of 3G mobile broadband to deliver the best, most advanced customer experience for customers throughout the evolution toward LTE.

As part of this multi-year agreement, Ericsson expands its key supplier role with AT&T by delivering LTE network equipment as well as a full suite of services to design, deploy and optimize the LTE network.

AT&T plans field trials of LTE technology later this year, and commercial deployment is scheduled to begin in 2011.

“The announcement is an important step forward in our ongoing mobile broadband strategy, which is focused on delivering the best possible combination of speed, performance and available devices for customers at every level of technology deployment,” said John Stankey, president and CEO, AT&T Operations. “AT&T has a key advantage in that LTE is an evolution of the existing GSM family of technologies that powers our network and the vast majority of the world’s global wireless infrastructure today.”

Hans Vestberg, president and CEO, Ericsson said: “Our ability to work together to meet the demands of a rapidly changing market has been a crucial element in gaining AT&T’s continued confidence. We will work just as hard to secure a smooth rollout of LTE and support AT&T in introducing new consumer and business services moving forward.”

AT&T previously named Ericsson as a key supplier for wireline accessproducts and services. Ericsson can offer wireline solutions to accelerate AT&T’s ability to bring new broadband-based products and services to market.

To date, Ericsson has signed commercial LTE contracts with four other major global operators, two of which are in the United States, the world’s fastest growing LTE market.

LTE, the next generation of mobile communication technology, enables the fast transfer of huge amounts of data in an efficient and cost-effective way, optimizing the use of the frequency spectrum. With increased speed and decreased latency, consumers can enjoy a wide range of applications (real-time web, online gaming, social media collaboration and video conferencing) effortlessly and while on the move. LTE will meet the demands of new and enhanced mobile internet applications of the future.

Ericsson has been driving open standards and has had the highest impact on the released LTE specifications. Ericsson expects to hold 25 percent of all essential patents for LTE, making it the largest patent holder in the industry.

Notes to editors:

[a small country operator example]
Ericsson selected by Magyar Telekom to modernize its network [May 4, 2011]

  • Market leader Magyar Telekom in Hungary chooses Ericsson as sole partner to modernize its radio access network and prepares for LTE
  • New  contract involves total overhaul of radio access network

With ever-increasing demands for data services and a strong commitment to providing the best available network performance and quality to its customers, leading Hungarian operator Magyar Telekom, of the Deutsche Telekom Group, has chosen Ericsson (NASDAQ: ERIC) to undertake a complete overhaul of its radio access network. The overhaul will drastically decrease Magyar Telekom’s operational costs while further expanding mobile broadband service performance and coverage.

Ericsson will transform Magyar Telekom’s 2G and 3G networks using the multi-standard RBS 6000 radio access network, which will also be ready for 4G/LTE functionality once licenses have been allocated.

Istvan Maradi, Chief Technology Officer of Magyar Telekom says:,”Our partner, Ericsson, will make sure our network will meet the most demanding expectations and help us to stay on top in Hungary. It is also makes sense for us to prepare our network for easy introduction of LTE functionality by using Ericsson’s multi-standard network.”

Nils de Baar, Head of Global Account for DT Group at Ericsson, says: “We believe in Magyar Telekom’s wise decision to introduce a multi-standard technology when the aging 2G network needs a strong boost. This will bring both a reduction in OPEX and a better user experience, while also preparing the network to meet the ever-growing demand for mobile broadband. This is a prestigious obligation for us and we will make every effort to meet our customers’ expectations.”

Ericsson Hungary celebrates 100 years in Hungary in 2011. Ericsson today has the largest R&D operation in the country. Emil Nilsson, Head of Customer Unit Central Europe and President of Ericsson Hungary, said: “This great win further emphasizes the importance of our long presence in the country and strong focus on technology leadership. With the agreement with Magyar Telekom, Ericsson has teamed up with the market leading operator once again in Hungary.”

Notes to editors:

Ericsson Hungary

Ericsson Hungary celebrates 100 years in Hungary in 2011. Ericsson Hungary believes it is the task of Ericsson to participate in developing the future of mobile and broadband internet communication with innovative solutions and to play a determinant role in forming the world of telecommunications through its activities related to the most advanced, leading research and technologies. Hungary, and the R&D center operating in the country, are to play a leading role in achieving this – of the almost 1500 employees in the country, more than 1000 are working in research and development, making Ericsson the largest company in Hungary dealing with telecom research and development. This year’s centenary milestone will be marked by two special achievements: one is the continual development of R&D activities, the other is today’s announcement that the market-leading operator has chosen the market leader in technology.


Vestberg foresees industry shift [Feb 15, 2010]

  • 3 billion new mobile broadband subscriptions in next five years
  • Industry focus on network capacity and quality
  • Innovation, speed and flexibility key success factors

Speaking at Ericsson’s (NASDAQ:ERIC) press conference at the GSMA Mobile World Congress in Barcelona Hans Vestberg, President and CEO, said, “Our future success will be determined by the ability to see beyond technology, stay ahead of our customers and solve their problems before they are even aware of them. This will require us to always put our customers first, always have the best competence and to drive innovation throughout the customer relationship.”

“In the past decade telecommunications have become the nerve system of the world. The number of mobile subscriptions worldwide has grown sixfold to 4.6 billion. Mobile broadband has had its breakthrough and we believe that we will see 3 billion new mobile broadband subscriptions in the next five years.

“We forecast that by 2015 mobile PC subscriptions will have grown six times and the traffic generated will grow more than 50 times compared with the end of 2009. In the same time period smartphone devices will grow four times and the traffic they generate will have grown more than 25 times. The rapidly increasing traffic puts a focus on network capacity and quality.

“We envision 50 billion connected devices by 2020. Patients will be remotely connected to hospitals, trucks will be online with logistics centers for efficient routing, and city students will be connected to students in rural villages halfway around the world. Several operators have already established machine-to-machine departments to meet these demands. In this development we have to move from traditional telecom to IP, from hardware to software and from network rollouts to network evolution.

“HSPA and 4G/LTE will enable the 50 billion connected devices and the continued traffic growth. Several leading operators have given us the confidence to deliver their 4G/LTE networks and we have established technology leadership and scale advantages.

“The overall LTE package with products and services is very competitive. We have taken these products to mass production and can manufacture on a large scale, which is a clear competitive advantage. The competition is fierce, but we can have grounds for having good self-confidence.”

Following the recent win with AT&T Ericsson now supplies its 4G/LTE solutions to operators that have a total of some 240 million subscribers. In the audience was Mr John Donovan, Chief Technology Officer at AT&T who briefly commented on his company’s plans for its LTE buildout and the reason for selecting Ericsson as its LTE equipment supplier.

Hans Vestberg continued, “In 2009 we significantly strengthened our position in North America. The rationale for the acquisition of the Nortel CDMA and LTE operations was to extend our footprint, expand customer relationships and gain a profitable CDMA business in North America. As the integration progresses, we are seeing opportunities for further CDMA business also outside North America.

“As the industry again moves into new territories, our role as a vendor must shift from just being a technology and services supplier to being a business enabler. Operators are looking to us to manage the increasing complexity of their networks so they can concentrate on enhancing the user experience. Our continued success in this area shows the value of our services offering. We will have to combine our strong technology leadership position and services capabilities to provide value to our customers. We have to drive innovation in both technology and business models,” concluded Vestberg.

Hans Vestberg, President and CEO

Notes to editors:

Ericsson part of winning bid for Nortel’s patent portfolio [July 1, 2011]

  • Ericsson’s contribution to transaction USD 340 million
  • Expected to close in the third quarter of 2011

As announced separately by Nortel Networks Corporation, a consortium of certain technology companies, of which Ericsson (NASDAQ:ERIC) is a part, emerged as the winning bidder for all of Nortel’s remaining patents and patent applications for a cash purchase price of USD 4.5 billion. The transaction is subject to approval by the United States and Canadian Bankruptcy Courts.

The Nortel patent portfolio comprises approximately 6,000 patents and patent applications from information and communication technologies (ICT) industry, including telecommunications, internet search and social networking. It covers mobile, LTE and data networking as well as optical, internet, service provider, semiconductors and other patent portfolios.

Kasim Alfalahi, Chief Intellectual Property Officer at Ericsson, says: “The Nortel patent portfolio reflects the heritage of more than 100 years of its R&D activities and includes some essential patents in telecommunications and other industries. We believe the consortium is in the best position to utilize the patents in a manner that will be favorable to the industry long term.”

SEB Enskilda is acting as financial advisor to Ericsson in the transaction.
Notes to editors:Read more at www.nortel.com/ [Nortel Announces the Winning Bidder of its Patent Portfolio for a Purchase Price of US$4.5 Billion: … After a multi-day auction, a consortium emerged as the winning bidder with a cash purchase price of US$4.5 billion. The consortium consists of Apple, EMC, Ericsson, Microsoft, Research In Motion and Sony. …]

Ericsson closes the Acquisition of GDNT, China [May 12, 2011]

  • Ensures continued development of CDMA and GSM businesses
  • All assumed agreements will be honored and fulfilled
  • Adds R&D, manufacturing and services capabilities

Ericsson (NASDAQ:ERIC) has today completed the asset purchase agreement to acquire certain assets of the Guangdong NortelTelecommunications Equipment Company Ltd (GDNT). This acquisition gives Ericsson talented R&D engineers, manufacturing and services professionals, as well as manufacturing and research facilities in the China region and ensures continued development of the CDMA & GSM businesses.

“With these new assets, we can even better support our customers globally,” said Rima Qureshi, Senior Vice President and Head of Business Unit CDMA Mobile Systems. “Our new and agile employees complement the existing R&D, manufacturing and services capabilities of our business.”

Mats H Olsson, President of Ericsson China & North East Asia said: “The completion of this acquisition reaffirms our strong commitment to the China market, while greatly enhancing our existing R&D, manufacturing and services capabilities in the region. I’m very happy to welcome this new source of energy into the Ericsson family and look forward to its continuous contribution to the development of GSM and CDMA markets not only here in the region, but also in the world.”

Today’s closing follows the announcement on December 1, 2010, that Ericsson was entering into an asset purchase agreement to acquire certain assets of the Guangdong Nortel Telecommunication Equipment Company Ltd (GDNT).

Some 1,000 former GDNT employees, including approximately 550 R&D engineerswill be integrated in to the Ericsson group over the coming months and will work under the Ericsson brand effective today. Former GDNT customers gain a business partner dedicated to the ongoing support of their networks and the assurance of a seamless transition. Manufacturing and Services will operate as a separate business entity, known as “Ericsson (Guangdong Shunde) Communications Company Limited, effective immediately.

SEB Enskilda acted as Ericsson’s sole financial advisor in the transaction.

Notes to editors:
Pictures of quote: www.ericsson.com/ericsson/press/photos/management.shtml

Acquisition of GDNT, an R&D and services company in China [Dec 1, 2010]

  • Secures continued development of CDMA and GSM businesses in China
  • Complements existing R&D and services capabilities in the region
  • Purchase price is USD 50 million

Ericsson (NASDAQ:ERIC) has today signed an agreement to acquire certain assets of the Guangdong Nortel Telecommunication Equipment Company Ltd (GDNT). The purchase is structured as an asset sale at a cash purchase price of USD 50 million on a cash and debt free basis, subject to final balance sheet adjustments. The transaction is also subject to customary regulatory approvals and other conditions.

GDNT is a leading research, development and manufacturing company based in China and an important supplier to Ericsson following the acquisitions of the CDMA and GSM businesses of Nortel. GDNT was founded in 1995 as a joint venture between Nortel, a Canadian Telecommunications Company and local Chinese corporations and telecom operators.  The transaction also includes R&D facilities, manufacturing facilities as well as support and customer service in China. Some 1,100 employees, including approximately 550 R&D engineers will be integrated in to the Ericsson group over the coming months.

“We are very happy to welcome this key competence into Ericsson’s newest business unit,” said Rima Qureshi, head of Ericsson’s CDMA Mobile Systems unit.  “We have built a strong foundation with the CDMA & GSM teams acquired from Nortel. With these new assets, we take control of our business by acquiring capabilities for the continued development of the CDMA & GSM businesses.”

“The acquisition greatly complements our existing R&D, manufacturing and services capabilities in the region,” said Mats H Olsson, President of Ericsson China & North East Asia. “It will no doubt allow us to provide even better support to our customers across the region who are serving one of the largest GSM and CDMA subscriber bases in the world.”

The transaction is expected to have a positive effect on Ericsson’s earnings within a year after closing.

SEB Enskilda is acting as Ericsson’s sole financial advisor in the transaction.

Notes to editors:

Pictures of Rima Qureshi and Mats H Olsson:

Acquisition of Nortel’s stake of the joint venture LG-Nortel [April 21, 2010]

  • Strengthened ability to serve the Korean market and reach new customers
  • Second largest installed base with all leading Korean operators
  • Purchase price is USD 242 million on a cash and debt free basis
  • New name of the joint venture will be LG-Ericsson

Ericsson (NASDAQ:ERIC) has today entered into a share purchase agreement to acquire Nortel’s majority shareholding (50%+1 share) in LG-Nortel, the joint venture of LG Electronics and Nortel Networks. The transaction is subject to customary regulatory approvals.

This acquisition will significantly expand Ericsson’s footprint in the Korean market and provide Ericsson with a well established sales channel and strong R&D capability in the country. Furthermore, the acquisition will provide Ericsson with an industrial base and the ability to build new customer relationships.

The joint venture includes important contracts with Korean operators such as KT, LG Telecom and SK Telecom.

LG-Ericsson will become one of the major telecom players in Korea.

“Korea is one of the largest telecom markets with advanced end-user demand of new services. A strengthening of our position through the collaboration with our new partner LG Electronics will enhance our position for future technology shifts such as LTE,” said Hans Vestberg, President and CEO of Ericsson.

“LGE is pleased to have Ericsson as a new partner in this joint venture,” said Yong Nam, Vice Chairman and CEO of LG Electronics. “Ericsson will provide global industry experience and technical expertise that will benefit both customers and employees. We look forward to a fruitful future collaboration.”

“LG-Ericsson is expected to provide the Korean market with leading technology and customer supports in cooperation with Ericsson’s Global Leadership in Telecommunication market. We are excited by the new perspective for our company.” said Jae Ryung Lee, CEO of LG-Nortel.

The joint venture was established in 2005 through the contribution by LG Electronics of its telecommunications systems business and by Nortel of its Korean distribution business. The focus of the joint venture has been to develop and market large scale telecommunications systems such as WCDMA, CDMA and LTE for telecom service providers in Korea as well as enterprise products and services. In 2009, LG-Nortel generated approximately USD 650 million of sales and had 1,300 employees.

The joint venture will continue to be headquartered in Seoul, Republic of Korea.

In July 2009, Ericsson and the Korean government agreed to cooperate in growing a green ecosystem based on 4G technology. The competence in LG-Ericsson is expected to contribute to this initiative.

The transaction is expected to have a positive effect on Ericsson’s earnings within a year after closing.

SEB Enskilda is acting as Ericsson’s sole financial advisor in the transaction.

Acquisition of substantially all the assets of Nortel’s GSM business completed [April 1, 2010]

  • Emphasizes commitment to North American market
  • Accretive to Ericsson’s earnings within a year

Ericsson (NASDAQ:ERIC) has completed the acquisition of Nortel’s North American GSM business. Today’s closing follows the announcement on November 25, 2009, that Ericsson had entered into an asset purchase agreement for these assets.

“The addition of Nortel’s skilled GSM experts adds additional depth to Ericsson’s newest business unit,” said Rima Qureshi, head of Ericsson’s CDMA unit.  “The CDMA team acquired from Nortel late last year has built a strong foundation already, and this new acquisition places us in a great position to support our growing list of North American and International customers.”

“The completion of this acquisition strengthens our position as a leading provider of telecommunications technology and services in the United States and Canada and shows our commitment to the market,” said Angel Ruiz, Head of Ericsson North America. “The skill and experience the Nortel employees bring to Ericsson will help us continue to provide exceptional services to our customers.”

The acquisition includes the transfer of important GSM business with North American operators and further strengthens Ericsson’s ability to serve North America’s leading wireless operators.  More than 350 employeesfrom Nortel will be integrated in the Ericsson group over the coming months.

The acquired operations are expected to be accretive to Ericsson’s earnings within a year after closing.

Ericsson’s bid for Nortel’s GSM assets was made together with Kapsch CarrierCom AG of Austria. Under the two transactions Ericsson is acquiring certain assets of Nortel’s GSM business in North America and Kapsch is acquiring certain assets outside North America.

In 2009, Ericsson also acquired Nortel’s CDMA and LTE assets in North America.

Notes to editors:Photos of Rima Qureshi and Angel Ruiz:

Ericsson to acquire Nortel’s North American GSM business [Nov 25, 2009]

Ericsson (NASDAQ:ERIC) was today selected as successful bidder to acquire certain assets of the Carrier Networks division of Nortel relating to Nortel’s GSM business in the US and Canada. The purchase is structured as an asset sale at a cash purchase price of USD 70 million on a cash and debt free basis, subject to adjustments. This announcement follows the completion of the auction process initiated by Nortel, and the transaction is subject to approval by courts in the US and Canada and customary regulatory approvals and other conditions.

Ericsson’s bid for Nortel’s GSM assets was made together with Kapsch CarrierCom AG of Austria. Under the agreements, Ericsson is acquiring certain assets of Nortel’s GSM business in North America while Kapsch is paying USD 33 million to acquire most of the remaining assets outside North America.

Ericsson acquires an installed GSM base, which expands its North American footprint. The acquisition further strengthens Ericsson’s ability to serve North America’s leading wireless operators, which now benefit from the strength of the combined resources in an experienced and financially strong company.

Along with our recent acquisition of Nortel’s CDMA and LTE assets, the transaction emphasizes Ericsson’s commitment to the North American market and strengthens our position as a leading provider of telecommunications technology and services in the United States and Canada” said Hans Vestberg, incoming President and CEO of Ericsson. “Our Ericsson family will be once again enriched by the addition of the valuable Nortel employees.”

The agreement includes the transfer of important GSM business with North American operators such as AT&T and T-Mobile. Under the agreement Ericsson will offer employment to approximately 350 employees from Nortel. Nortel’s North American GSM operations generated approximately USD 400 million in 2008.

Ericsson’s North American business generated SEK 17.9 bn (USD 2.7 b) of sales in 2008, mainly from GSM and WCDMA equipment and associated services. Together with the recently announced acquisition of CDMA and LTE assets as well as the Sprint services agreement, the acquisition makes North America the largest geographical segment within Ericsson and encompasses some 14,500 employees, up from 5,000 at the beginning of 2009.

The acquired operations will contribute top- and bottom-line additions to Ericsson. The transaction is expected to have a positive effect on Ericsson’s earnings within a year after closing.

Consummation of the transaction is subject to approval by the United States and Canadian Bankruptcy Courts and the satisfaction of regulatory and other conditions.

SEB Enskilda is acting as Ericsson’s sole financial advisor in the transaction.

Notes to editors: Picture of Hans Vestberg:

Previously announced information on Ericsson’s acquisitions of Nortel assets:

Ericsson closes the Acquisition of Nortel’s Multiservice Switch business [March 11, 2011]

  • High level of data experience in key locations
  • Customers gain a stable, committed partner
  • The Multiservice Switch business will operate under the Ericsson brand as of today

Ericsson (NASDAQ:ERIC) has today completed the asset purchase agreement to acquire Nortel’s Multiservice Switch business. This acquisition gives Ericsson access to a strong product portfolio and installed base in the data segment while ensuring the supply of the platform for the recently acquired CDMA and GSM units.

“We are gaining a solid business with a significant installed base and technology that complements our existing Ericsson portfolio. In key locations around the globe, we grow our data capability with experienced and talented people.” said Rima Qureshi, senior vice president and head of business unit CDMA Mobile Systems.

An important part of the CDMA ecosystem, the Multiservice Switch business offers the sale and support of data networks and switching platforms for core networks within the wireless and carrier voice divisions, previously acquired from Nortel. The Multiservice switches, to be called PPX henceforth, serve a valuable need for a multiplicity of services that the backbone network provides today for our customers.

Today’s closing follows the announcement on September 25, 2010, that Ericsson was entering into an asset purchase agreement for substantially all of the assets of Nortel’s Multiservice Switch Business.

The former Nortel Multiservice Switch staff will be integrated into the Ericsson group in business unit CDMA Mobile Systemsover the coming months and will work under the Ericsson brand effective today. Former Nortel customers gain a stable partner committed to the ongoing evolution of their networks and the assurance of a seamless business transition.

SEB Enskilda acted as Ericsson’s sole financial advisor in the transaction.

Notes to editors: Photos of Rima Qureshi:

Acquisition of Nortel’s Multi-Service Switch business [Sept 25, 2010]

  • Confirms commitment to CDMA portfolio
  • Strengthens R&D and services capabilities within CDMA
  • Cash purchase of USD 65 million

Ericsson (NASDAQ:ERIC) has today entered into an asset purchase agreement to acquire Nortel’s Multi-Service Switch business (MSS). This acquisition gives Ericsson access to a strong product portfolio and installed base in the data segment while ensuring the supply of the MSS platform for the recently acquired CDMA and GSM units.

An important part of the CDMA ecosystem, MSS offers the sale and support of data networks and switching platforms for core networks within the recently acquired wireless and carrier voice divisions. MSS serves a valuable need for a multiplicity of services that the backbone network provides today for our customers.

The purchase is structured as an asset purchase at a cash purchase price of USD 65 million on a cash and debt free basis, subject to adjustments. This announcement follows the completion of the auction process initiated by Nortel, and the transaction is subject to court approval and customary regulatory approvals.

“Today’s announcement is further evidence of our commitment to our CDMA portfolioas we continue to strengthen our in-house R&D and services muscle to deliver on the innovation, collaboration and support that our customers have come to expect from us.” said Rima Qureshi, senior vice president and head of business unit CDMA Mobile Systems.

Consummation of the transaction is subject to approval by the relevant Bankruptcy Courts and the satisfaction of regulatory and other conditions.

SEB Enskilda is acting as Ericsson’s sole financial advisor in the transaction.

Notes to editors:Photos of Rima Qureshi:

Ericsson strengthens global position with completion of Nortel acquisition in North America [Nov 13, 2009]

Ericsson (NASDAQ: ERIC) today completed its acquisition of substantially all of Nortel’s CDMA business and LTE assets in North America. With this acquisition, Ericsson enhances its leading global telecommunications equipment supplier position and will further its quest to bring high-speed data connectivity to people on the move.

The Nortel acquisition, on the heels of important breakthrough contract wins for Ericsson in North America, positions Ericsson as the leading provider of telecommunications technology and services in the United States and Canada.

“Separately, our two companies played leading roles in freeing voice telephony from its fixed limitations,” said Hans Vestberg, Ericsson’s incoming president and chief executive officer. “Together, we will do the same for broadband – make it mobile and bring the benefits of high-speed data connectivity to the majority of the world’s population”.

“This deal, along with our recently announced services and LTE agreements, demonstrates the importance of the North American market to Ericsson. Our strength in the region proves to our global customers that we are capable of continuing to provide the best equipment and services, in a scaleable and efficient way,” said Vestberg.

In terms of sales, North America will now be Ericsson’s largest region.According to Angel Ruiz, head of Ericsson’s North American operations, the acquisition significantly expands Ericsson’s footprint in North America, particularly as the region is emerging as an early adopter of LTE technology.

Ericsson will enjoy new access to North American CDMA customers and can better support CDMA networks that will transition to LTE, “said Ruiz.

In addition to the talented people Ericsson gains through the combination, it will also benefit from intimate knowledge of Nortel’s CDMA customers and their networks. In turn, these operators gain a stable partner committed to the ongoing evolution of their networks, and the assurance of a seamless transition.

“I look forward to working with the more than 2,500 highly skilled colleagues in North America and China arriving from Nortel,” said Magnus Mandersson, president of Ericsson CDMA Operations. Combined with the transition of employees in the recent Sprint deal, Ericsson now has some 14,000 employees in North America, making it the company’s second largest market based on number of employees.

The acquisition includes the transfer of important CDMA contracts with North American operators including Verizon, Sprint, U.S. Cellular, Bell Canada, Telus and Leap, as well as LTE assets, certain patents and patent licenses relating to CDMA and LTE. Nortel’s customers will also benefit from the continued support of Nortel’s installed CDMA base and the migration path to LTE.

Today’s closing follows the announcement on July 25, 2009, that Ericsson was entering into an asset purchase agreement of USD 1.13 b. for these assets, subject to approval by the United States and Canadian Bankruptcy Courts and the satisfaction of regulatory and other conditions.

The former Nortel staff will be integrated into the Ericsson group over the coming months and the entity will work under the Ericsson brand beginning today.

The results for these operations will be consolidated by Ericsson on a pro-rata basis from the closing date proportionally within segments Networks and Professional Services. The report for the fourth quarter 2009 will be the first accounts including the new entity.

Notes to editors:
A video interview with Hans Vestberg available in our broadcast room on: www.ericsson.com/press/broadcastroom

Ericsson to acquire majority of Nortel’s North American wireless business [July 25, 2009]

Ericsson (NASDAQ:ERIC) has today entered into an asset purchase agreement to acquire the parts of the Carrier Networks division of Nortel relating to CDMA and LTE technology in North America. The purchase is structured as an asset sale at a cash purchase price of USD 1.13 b. on a cash and debt free basis. This announcement follows the completion of the auction process initiated by Nortel, and the transaction is subject to court and customary regulatory approvals.

Ericsson acquires an installed base and a healthy business that provides major operators CDMA technology and support services. In addition, the acquisition strengthens Ericsson’s ability to serve North America’s leading wireless operators in the evolution to LTE. The acquisition significantly expands Ericsson’s footprint in North America, particularly as this region is emerging as an early adopter of LTE technology. The acquisition also provides Nortel’s customers with a strong and reliable supplier for the future, many of which have expressed support for this acquisition.

“Acquiring Nortel’s North American CDMA business allows us to serve this important region better as we build relationships for the future migration to LTE. Furthermore, by adding some 2,500 highly skilled employees, of which about 400 are focused on LTE research and development, Ericsson reinforces and expands a long-term commitment to North America. This deal, along with our recently announced Sprint service agreement, truly positions Ericsson as a leading telecoms supplier in North America,” said Carl-Henric Svanberg, President and CEO of Ericsson.

The agreement includes important CDMA contracts with North American operators such as Verizon, Sprint, U.S. Cellular, Bell Canada and Leap, as well as LTE assets, certain patents and patent licenses relating to CDMA and LTE. Nortel’s customers will also benefit from the continued support of Nortel’s installed CDMA base and the migration path to LTE.

Nortel’s North American CDMA operations generated approximately USD 2.0 b. in 2008, with robust profitability from a good product mix, which includes a significant amount of services. Going forward, research and development costs are expected to be relatively low in CDMA compared with other technologies.

Ericsson’s North American business generated SEK 17.9 (USD 2.7) b. of sales in 2008, mainly from GSM and WCDMA equipment and associated services. When coupled with the recently announced Sprint services agreement, this acquisition makes North America the largest region within Ericsson and encompasses some 14,000 employees.

The robust financial profile of the acquired operations will contribute significant top- and bottom-line additions to Ericsson. The transaction is expected to have a positive effect on Ericsson’s earnings within a year after closing. Magnus Mandersson, presently head of Ericsson Northern Europe, is appointed President of Ericsson CDMA operations, and Richard Lowe, Nortel, is appointed Chief Operating Officer.

“Our two companies share a long-standing commitment to technological excellence and innovation, and we look forward to welcoming the Nortel employees into Ericsson.  We are truly impressed with their continuing outstanding performance during these challenging times,” said Magnus Mandersson, President of Ericsson CDMA operations.

“The agreement with Ericsson provides a strong and stable future for Nortel’s CDMA and LTE business. Customers will enjoy continued strong support from an industry leader as they look to evolve to LTE. Many employees will also have the opportunity to continue their work with Ericsson, bringing their innovation power and creativity to the wireless industry for years to come,” said Richard Lowe, President of Carrier Networks at Nortel.

Consummation of the transaction is subject to approval by the United States and Canadian Bankruptcy Courts and the satisfaction of regulatory and other conditions.

SEB Enskilda is acting as Ericsson’s sole financial advisor in the transaction.

(Under Creditor Protection Proceedings as of January 14, 2009 — note 2)

Nortel Networks Corporation

Prior to Nortel’s significant business divestitures, Nortel Networks Corporation (“Nortel” or “NNC”) was a global supplier of end-to-end networking products and solutions serving both service providers and enterprise customers. Nortel’s technologies spanned access and core networks and support multimedia and business-critical applications. Nortel’s networking solutions consisted of hardware, software and services. Nortel designed, developed, engineered, marketed, sold, licensed, installed, serviced and supported these networking solutions worldwide. As further discussed in note 2, Nortel is currently focused on the remaining work under the Creditor Protection Proceedings (as defined in note 2), including the sale of the remaining assets, providing transitional services to the purchasers of Nortel’s businesses and ongoing restructuring matters.

As of March 31, 2011, Nortel has completed the sales of all of its businesses and regarding these businesses only the residual contracts not transferred to the various buyers remain.

Significant Business Divestitures

On June 19, 2009, Nortel announced that it was advancing in discussions with external parties to sell its businesses. To date, Nortel has completed divestitures of all of its businessesincluding:

(i) the sale of substantially all of its Code Division Multiple Access (“CDMA”) business and Long Term Evolution (“LTE”) Access assets to Telefonaktiebolaget LM Ericsson(“Ericsson”);

(ii) the sale of substantially all of the assets of its Enterprise Solutions (“ES”) business globally, including the shares of Nortel Government Solutions Incorporated (“NGS”) and DiamondWare, Ltd., to AvayaInc. (“Avaya”);

(iii) the sale of the assets of its Wireless Networks (“WN”) business associated with the development of Next Generation Packet Core network components to Hitachi, Ltd.;

(iv) the sale of certain portions of its Layer 4-7 data portfolio to RadwareLtd.;

(v) the sale of substantially all of the assets of its Optical Networking and Carrier Ethernet businesses to CienaCorporation (“Ciena”);

(vi) the sale of substantially all of the assets of its Global System for Mobile communications (GSM)/ GSM for Railways (“GSM-R”) business to Ericsson and KapschCarrierCom AG (“Kapsch”);

(vii) the sale of substantially all of the assets of its Carrier VoIP and Application Solutions (“CVAS”) business to GENBANDInc. (now known as GENBAND U.S. LLC (“GENBAND”));

(viii) the sale of NNL’s 50% plus 1 share interest in LG-Nortel Co. Ltd. (“LGN”), its Korean joint venture with LG Electronics, Inc. (“LGE”), to Ericsson;

(ix) the sale of substantially all of the assets of its global Multi Service Switch (MSS) business to Ericsson; and

(x) the sale of substantially all of the Guangdong-Nortel Telecommunications Equipment Co. Ltd. (“GDNT”), assets to Ericsson Mobile Data Applications Technology Research and Development Guangzhou Company Limited and Ericsson(Guangdong Shunde) Communications Company Limited (collectively, “Ericsson China”).

On April 4, 2011, Nortel announced that it had entered into a stalking horse agreement with Ranger Inc., a wholly owned subsidiary of Google Inc. (“Google’) for the sale of its remaining patents and patent applications.

Business Divestiture Proceeds Received

As of March 31, 2011, of the approximately $3,183 in net proceeds generated through the completed sales of businesses proceeds of approximately $3,171 had been received. These divestiture proceeds include the following approximate amounts:

(a) $1,070 from the sale of substantially all of Nortel’s CDMA business and LTEAccess assets;

(b) $18 from the sale of Nortel’s Layer 4-7 data portfolio;

(c) $10 from the sale of Nortel’s Packet Core Assets;

(d) $932 from the sale of substantially all of the assets of Nortel’s ES business, including the shares of DiamondWare, Ltd. and NGS;

(e) $631 from the sale of substantially all of the assets of Nortel’s Optical Networking and Carrier Ethernet businesses;

(f) $67 from the sale of Nortel’s North American GSM business;

(g) $21 from the sale of Nortel’s GSM business outside of North America (excluding its GSM business in CALA) and its global GSM-R business;

(h) $137 from the sale of substantially all of Nortel’s CVAS business, net of an estimated reduction in purchase price (see below);

(i) $234 from the sale of Nortel’s 50% plus one share interest in LGN;

(j) $47 from the sale of substantially all of Nortel’s MSS business; and

(k) $4 from the sale of various Nortel business assets.

Nortel Commences Comprehensive Business and Financial Restructuring [Jan 14, 2009]

Nortel* Networks Corporation [NYSE/TSX: NT] announced that it, Nortel Networks Limited (“NNL”) and certain of its other Canadian subsidiaries will seek creditor protection under the Companies’ Creditors Arrangement Act (“CCAA”) in Canada. As well, certain of the Company’s U.S. subsidiaries, including Nortel Networks Inc. and Nortel Networks Capital Corporation, have filed voluntary petitions in the United States under Chapter 11 of the U.S. Bankruptcy Code, and certain of the Company’s EMEA** subsidiaries are expected to make consequential filings in Europe. The Company’s normal day-to-day operations are expected to continue without interruption. Nortel remains 100% focused on serving customers worldwide through continued R&D investments and support of its product portfolio to fulfill customer needs.

Nortel made this decision with the unanimous authorization of its Board of Directors after thorough consultation with its advisors and extensive consideration of all other alternatives. This process will allow Nortel to deal decisively with its cost and debt burden, to effectively restructure its operations and to narrow its strategic focusin an effective and timely manner.

The Company commenced a process to turn around and transform Nortel in late 2005, and the Company made important progress on a number of fronts.  However, the global financial crisis and recession have compounded Nortel’s financial challenges and directly impacted its ability to complete this transformationNortel is taking this action now, with a $2.4 billion*** cash position, to preserve its liquidity and fund operations during the restructuring process.

“Nortel must be put on a sound financial footing once and for all,” said Nortel President and CEO Mike Zafirovski.  “These actions are imperative so that Nortel can build on its core strengths and become the highly focused and financially sound leader in the communications industry that its people, technology and customer relationships show it ought to be.  I am confident that the actions we’re announcing today will be the fastest, most effective means to translate our improved operational efficiency, double-digit productivity, focused R&D and technology leadership into long-term success. I want to reaffirm Nortel’s dedication to delivering world-class solutions and services to customers.”

The application under the CCAA will be heard later today by the Ontario Superior Court of Justice. The voluntary petitions under Chapter 11 were filed with the United States Bankruptcy Court for the District of Delaware.  Nortel expects to be in a position shortly to provide an update regarding the consequential filings by certain of its EMEA subsidiaries.

The Company’s affiliates in Asia, including LG Nortel and in the Caribbean and Latin America, as well as the Nortel Government Solutions business, are not included in these proceedings and are expected to continue to operate in the ordinary course.

Nortel To Sell CDMA Business and LTE Assets; Company Advancing in Its Discussions With External Parties To Sell Other Businesses[June 19, 2009]

      • Enters into a Stalking Horse Sale Agreement for CDMA Business and LTE Access Assets with Nokia Siemens Networks for US$650 million
      • Sale of Businesses is Best Path for Nortel to Maximize Value While Preserving Innovation, Customer Relationships and Jobs to Greatest Extent Possible
      • Will Apply to Toronto Stock Exchange to Delist Shares and Expects Creditor Protection Proceedings Will Ultimately Result in Cancellation of Shares

… The agreement with NSN specifies that at least 2,500 employees would have the opportunity to continue with NSN.  This represents a significant portion of the employees associated with the assets being sold.

In addition to announcing this sale agreement, Nortel announced that it is advancing in its discussions with external parties to sell its other businesses. The company will assess other restructuring alternatives for these businesses in the event it is unable to maximize value through sales.

Commenting on the announcements, Nortel President and Chief Executive Officer, Mike Zafirovski said:

“Maximizing the value of our businesses in the face of a consolidating global market has been our most critical priority. We have determined the best way to do this is to find buyers for our businesses who can carry Nortel innovation forward, while preserving employment to the greatest extent possible.  This will ensure Nortel’s strong assets – technologies, customer relationships, and employees – continue to play an important role in driving the future of communications.  The value of Nortel’s wireless business is recognized throughout the industry.  The agreement we are announcing today is solid proof of that value and represents the best path forward for our other businesses.”

Zafirovski continued: “We also believe this will help provide clarity for our customers and employees. Customers have demonstrated consistent support for our products and services, and we want to ensure they continue to benefit from Nortel’s technology and know-how.  In addition, Nortel’s employees are doing a tremendous job under challenging conditions, stabilizing our business and delivering outstanding service to our customers.  It is important to provide our employees with a clear sense of direction around their future and potential opportunities with the new companies.”

The wireless business is the second largest supplier of CDMA infrastructure in the world.  It does business with three of the five top CDMA operators globally, including Verizon Wireless, which operates the largest wireless voice and data network in the United States.

Commenting on the wireless business announcement, Richard Lowe, President, Carrier Networks added:

“Seeking a strong and stable buyer is the best path forward for our CDMA business and LTE Access assets. If successfully completed, this transaction would give many of our CDMA customers a clear roadmap for the future evolution of their networks and the opportunity to extend their relationship with a long-term partner. Further, we expect that a significant portion of the employees associated with the assets being sold would be able to continue their innovative work.”

Lowe continued, “Nortel has a long track record of wireless innovation which has helped us secure a strong and loyal customer base. Throughout this sale process, our customers will continue to receive the highest quality support for their current networks. If successfully concluded, the buyer would gain access to leading edge technology, know-how, and embedded resources to support this significant customer base.”

Details of Sale Process for CDMA Business and LTE Access Intellectual Property Rights

Nortel will file the stalking horse asset sale agreement with the United States Bankruptcy Court for the District of Delaware along with a motion seeking the establishment of bidding procedures for an auction that allows other qualified bidders to submit higher or otherwise better offers, as required under Section 363 of the U.S. Bankruptcy Code. A similar motion for the approval of the bidding procedures will be filed with the Ontario Superior Court of Justice.

In addition to the bidding process and U.S. and Canadian court approvals, consummation of the CDMA business and LTE Access transaction is subject to the satisfaction of customary and other conditions, including governmental approvals such as in Canada and the United States.  The stalking horse asset sale agreement is also subject to purchase price adjustments under certain circumstances.

Nortel Statement on Wireless Asset Auction [July 22, 2009]

As previously announced, on June 19, 2009, Nortel* [OTC: NRTLQ] entered into a stalking horse sale agreement with Nokia Siemens to sell substantially all of its CDMA business and LTE Access assets, subject to higher or better offers being received. On June 29, 2009, in the U.S., and June 30, 2009, in Canada, the courts established bidding procedures for the auction of these assets. The auction is scheduled to take place on July 24, 2009. Throughout this process, Nortel has made every effort to ensure all who want to participate can, with the goal of achieving the best outcome possible for employees and customers and maximizing value for its stakeholders.

Nortel had been in discussions with RIM regarding a related transaction but those discussions are currently on hold. Since the approval of the bidding procedures, Nortel has engaged with a number of potential bidders regarding the CDMA and LTE assets, including RIM.  Other parties moved expeditiously to comply with the court approved procedures to become qualified bidders, and RIM did not object to the approval of these procedures during the court process. It was not until  July 15 that  RIM submitted a letter to Nortel asking to be a qualified bidder and, since that time, Nortel has diligently attempted to work with RIM on acceptable confidentiality terms relating to Nortel’s valuable intellectual property assets. RIM has refused, however, to comply with the court approved procedures.

In order to participate in the court-approved bidding process, a qualified bidder is required to execute a standard confidentiality agreement. The agreement contains a common “standstill” provision that allows Nortel to ensure it is directly involved in any future negotiations on the sale of its assets. The standstill provision does not preclude future offers by a bidder to acquire assets consistent with any processes established by Nortel or the courts. Confidentiality agreements are a standard part of the auction bidding process and are designed to help run a fair process and protect a company’s confidential information, such as its intellectual property.  All qualified bidders are subject to confidentiality agreements.

Nortel, the Canadian Monitor, the U.S. Unsecured Creditors’ Committee and the Ad Hoc Bondholder Group have reviewed the circumstances related to RIM and have concluded that all bidders must comply with the bidding rules in order to maintain the integrity of the court-approved process. Consistent with that process, the auction will commence as planned on Friday, July 24, 2009.

Nortel Selects Ericsson as Successful Bidder For CDMA Business and LTE Access Assets [July 25, 2009]

  • Enters into Sale Agreement for CDMA Business and LTE Access Assets with Ericsson for US$1.13 Billion
  • A Minimum of 2,500 Nortel Employees will be Offered the Opportunity to Continue their Work at Ericsson
  • Canadian and U.S. Court Approvals of the Sale will be Sought at a Joint Hearing on July 28

TORONTO – Nortel* Networks Corporation [OTC: NRTLQ] announced today that it, its principal operating subsidiary Nortel Networks Limited, and certain of its other subsidiaries including Nortel Networks Inc.,  have concluded a successful auction of substantially all of Nortel’s CDMA Business and LTE Access assets. Telefonaktiebolaget LM Ericsson (“Ericsson”) has emerged as the winning bidderwith a purchase price of US$1.13 billion. The bid is subject to court approvals in the U.S. and Canada as well as regulatory and other customary closing conditions and certain post-closing purchase price adjustments.

If approved by the courts, Ericsson will purchase Nortel’s CDMA business which is the second largest supplier of CDMA infrastructure in the world, and substantially all of Nortel’s LTE Access assets giving it a strong technology position in next generation wireless networks. Also as part of this agreement, a minimum of 2,500 Nortel employees supporting the CDMA and LTE Access business will receive offers of employment from Ericsson.

Commenting on the announcement, Nortel President and Chief Executive Officer, Mike Zafirovski said:

“The anticipated sale of our CDMA business and LTE Access assets to Ericsson for $1.13 billion represents a very positive prospect for our customers who will be able to continue their relationships with a long term partner; for employees who will have new opportunities at Ericsson and for many of our other stakeholders. I want to especially thank our customers for their tremendous support during the process, which contributed to such a positive outcome.”

“Nortel remains focused on finding the right buyers for our other businesses while continuing to maintain excellent customer service levels. We are determined to maximize value while preserving innovation platforms, customer relationships and jobs to the greatest extent possible. With today’s agreement and through the anticipated sales of the Company’s other businesses, Nortel will leave its mark on the industry for decades to come.”

Commenting on the sale, Richard Lowe, President of Carrier Networks at Nortel, said:

“The outcome of today’s auction underscores the value the industry places on Nortel’s CDMA business and LTE Access assets, which include a strong customer base and world-class operations. Nortel’s extremely talented and committed employees have been an integral part of our success in wireless and we are very pleased that so many of them will have the opportunity to continue their innovative work with Ericsson.”

Carl-Henric Svanberg, President and CEO of Ericsson said:

“The agreement between Nortel and Ericsson brings together leading-edge wireless innovation from two of the world’s top telecommunications suppliers. We at Ericsson look forward to integrating Nortel’s products and talented employees into our business and realizing the full potential of our combined strengths.  Ericsson is committed to meeting the needs of our new CDMA customers today and bringing the next generation of mobile broadband to the world with LTE.”

While today’s auction is a significant step in the overall sale process, it is not the final step. Nortel will work diligently with Ericsson to close the sale later this year. Nortel will seek Canadian and U.S. court approvals of the proposed sale agreement at a joint hearing on July 28, 2009.

As previously announced in the Company’s June 19 and July 20, 2009 press releases, the Company does not expect that its common shareholders or the preferred shareholders of Nortel Networks Limited will receive any value from the creditor protection proceedings and expects that the proceedings will result in the cancellation of these equity interests

IV. Nokia Siemens Networks (NSN)

Nokia Siemens Productivity Trails Ericsson’s [July 15, 2011]

Nokia Siemens Networks, which this week ended talks to sell a stake to buyout firms, needs to cut jobs to gain the option of independence as competition with rivals including Huawei Technologies Co. intensifies.

The phone equipment venture between Nokia Oyj (NOK1V) and Siemens AG (SIE) generated sales of about $254,000 per employee last year, 19 percent less than larger rival Ericsson AB, based on numbers from the companies’ financial reports. The figure for both manufacturers is sinking as selling prices for equipment such as base stations and packet-switching networks decline.

Nokia Siemens said this week that it plans to improve its competitiveness “as a standalone entity” while announcing the end of talks over a stake sale. The Espoo, Finland-based venture, which has been unprofitable for all but one quarter since it started in April 2007, has increased its headcount to about 73,000 from about 60,000 after additions for outsourcing and the acquisition of a Motorola Solutions Inc. unit. In Germany alone, Nokia Siemens has almost 10,000 workers.

Nokia said July 12 that it’s open to other ownership options for the 50-50 venture, without elaborating. … Nokia, which has more shared interest with Nokia Siemens since both sell to phone companies, is paring down assets that aren’t essential to its main devices product lines. …

The joint venture has lost 3.35 billion euros from operations, restructuring, and impairment charges for Siemens since it was formed. Siemens Chief Financial Officer Joe Kaeser has repeatedly said that telecommunications is no longer a core business for the company.

Nokia Siemens and Ericsson have focused on wireless network equipment such as base stations and core networks and have expanded in software and services to a greater extent than competitors Alcatel-Lucent SA, Huawei and ZTE Corp. (000063) Nokia Siemens gets about half its revenue from services, including running entire networks remotely from India and Portugal. Ericsson counts about 40 percent of its revenue as services.

Nokia Siemens had 20.4 percent of the wireless equipment market in the first quarter, up from 18.2 percent a year earlier, according to Redwood Shores, California-based researcher Dell’Oro Group. Huawei was almost tied with Nokia Siemens at 20.3 percent and Ericsson had 34.5 percent. Alcatel- Lucent’s share was 13.7 percent.

Nokia Siemens announced in November 2009 that it would eliminate between 7 percent and 9 percent of the 64,000 positions it had at the time. The aim was to cut 500 million euros in annual costs by the end of this year. It has reported more than 1.05 billion euros in operating losses since the job cuts announcement.

“They need to remove the question mark around the ownership structure,” Sylvain Fabre, an analyst at Stamford, Connecticut-based Gartner Inc., said in a phone interview. “The first thing you learn in business school is you never do 50-50, you do at least 51-49. Until you really know who’s in charge you don’t really know what direction is ultimately imposed in the company.”

Nokia Siemens Networks completes acquisition of certain wireless network infrastructure assets of Motorola Solutions [April 29, 2011]

  • Pays US $975 million in cash
  • Approximately 6900 employees will transfer to Nokia Siemens Networks
  • Takes on responsibility for 50 operator customers in 52 countries

Nokia Siemens Networks and Motorola Solutions, Inc. (NYSE: MSI) today jointly announced that Nokia Siemens Networks has completed its acquisition of Motorola Solutions’ Networks assets paying US $975 million in cash. As of April 30 2011, responsibility for supporting customers of Motorola Solutions’ GSM, CDMA, WCDMA, WiMAX and LTE products and services transfers to Nokia Siemens Networks.

“The people, customers and technology we’ve acquired greatly complement our existing business by taking us into new markets and broadening our market share,” said Rajeev Suri, chief executive officer, Nokia Siemens Networks. “Our combined knowledge and experience will provide our newly expanded customer base with the means to grow by providing greater value to their subscribers.”

“Motorola Solutions is pleased to complete this transaction to combine our Networks team with an industry leader,” said Greg Brown, president and chief executive officer, Motorola Solutions. “This is great news for our customers, our investors and our people and will allow Motorola Solutions to further sharpen our strategic focus on providing mission-critical solutions for our government and enterprise customers.”

The acquisition strengthens Nokia Siemens Networks’ position in key regions, particularly North America and Japan, as well as with some of the world’s major service providers. Based on revenue, the addition of Motorola Solutions’ Networks assets makes Nokia Siemens Networks the third largest wireless infrastructure vendor in the United States and the leading non-Japanese wireless vendor in Japan. In addition, the acquisition reinforces Nokia Siemens Networks’ position as the world’s second largest wireless infrastructure and services provider.

As part of the deal, responsibility for supporting 50 operators across 52 countries, as well as approximately 6900 employees, will transfer to Nokia Siemens Networks. In addition, Nokia Siemens Networks is acquiring a number of research and development facilities including sites in the United States, China, Russia, India and the UK.

[Nokia Siemens Networks to Acquire Certain Wireless Network Infrastructure Assets of Motorola for US $1.2 Billion [July 19, 2010]

  • Transaction expected to significantly strengthen Nokia Siemens Networks’ presence globally, particularly in the United States and Japan.
  • Nokia Siemens Networks targeting to gain incumbent relationships with more than 50 operators and strengthen relationships with others.
  • Acquisition to enhance position of Nokia Siemens Networks in key wireless technologies; will give company large global footprint in CDMA.
  • Motorola retains the iDEN business, substantially all the patents related to its wireless network infrastructure business, and other selected assets.
  • The companies expect to complete closing activities by the end of 2010.

… As part of the transaction, Nokia Siemens Networks expects to gain incumbent relationships with more than 50 operators and to strengthen its position with China Mobile, Clearwire, KDDI, Sprint, Verizon Wireless and Vodafone. …

Motorola’s networks infrastructure business provides products and services for wireless networks, including GSM, CDMA, WCDMA, WiMAX and LTE. This business is a market leader in WiMAX, with 41 contracts in 21 countries; has a strong global footprint in CDMA with 30 active networks in 22 countries; and a robust GSM installed base, with more than 80 active networks in 66 countries; and excellent traction with LTE early adopters. …]

Nokia Siemens Networks to participate in large scale China TD-LTE trial [March 25, 2011]

Provides TD-LTE network, OSS, services for large-scale field trial in Hangzhou

With the approval of the Ministry of Industry and Information Technology of the People’s Republic of China (MIIT), Nokia Siemens Networks has become one of the first telecommunications equipment vendors to participate in the large-scale TD-LTE trial with China Mobile. Nokia Siemens Networks will offer its commercial 2.3GHz/2.6GHz TD-LTE equipment, professional services and management software to conduct the major field trial in Hangzhou.

Nokia Siemens Networks has already completed both 2.3 and 2.6GHz outdoor, and 2.3GHz indoor, single-system testing with TD-LTE. The company is one of the first global vendors to be selected for the large-scale TD-LTE field trials with China Mobile. In addition, Nokia Siemens Networks has conducted interoperability tests of its TD-LTE equipment with a number of TD-LTE devices of major suppliers. As stated by MIIT, Nokia Siemens Networks will cooperate with China Mobile to accelerate network construction, equipment installation, and network optimization according to the overall requirements and plan of the large-scale TD-LTE trial in Hangzou.

Nokia Siemens Networks has built a complete TD-LTE business in China, integrating procurement, production, testing and maintenance with its Hangzhou R&D Center at the center of this value chain,” said Markus Borchert, head of Greater China customer operations at Nokia Siemens Networks. “The approval by MIIT confirms our long-term support for TD-LTE and our leadership driving the global ecosystem for unpaired frequency bands.”

In addition to its market-leading Single RAN Advanced radio equipment, Nokia Siemens Networks will provide network planning and network optimization services to ensure sustained network quality and performance. Configuration, monitoring and optimization for this project will be based on the company’s Network Management System, NetAct.

Technology talk: Accelerating mobile broadband with TD-LTE [NSN’s Unite magazine, Feb 11, 2011]

Enabling communications service providers (CSP) to take advantage of unpaired spectrum to deliver high speed mobile broadband, Time Division Duplex (TDD) LTE, or TD-LTE, became a global technology in 2010. Important milestones included the first TD-LTE call in India Broadband Wireless spectrum at 2.3 GHz and the success of TD-LTE tests by China’s Ministry of Industry and Information Technology(MIIT).

TD-LTE is a natural evolution of TD-SCDMA, and WiMAX networks and takes care of interworking, coexistence and roaming between different technologies. TD-LTE also helps WiMAX CSPs to enjoy the economies of scale, roaming and network sharing benefits of the large 3GPP ecosystem, therefore making it important for WiMAX and TD-LTE to co-exist.

Leading manufacturers are developing TD-LTE terminals, while chipset and platform vendors are announcing availability of multi-mode LTE (FDD and TDD) offerings to ensure CSP service roll-outs with one common technology platform. Nokia Siemens Networks has made significant contributions to TD-LTE development. The company’s ‘TD-LTE Open Labs’ facility in Hangzhou, China is fostering and accelerating developments by enabling vendors to undertake end-to-end testing and validate their solutions before delivery.

Nokia Siemens Networks readies TD-LTE for India [Oct 19, 2010]

First TD-LTE call on country’s Broadband Wireless Access spectrum*

Nokia Siemens Networks is the first company to successfully demonstrate the Time Division Duplex version of LTE (TD-LTE)** using broadband wireless access (BWA) spectrum in India. The first video call was made by Gurdeep Singh, chief operating officer of Aircel. The call was conducted with the 4G mobile technology running on commercial hardware at the Nokia Siemens Networks’ Bengaluru R&D facility. It marks an important milestone moving 2.3 GHz TD-LTE closer to commercial availability.

During the test, Nokia Siemens Networks demonstrated high-definition video streaming and three-way video conferencing. Using interoperable TD-LTE dongles from Samsung, the demo showcased a peak throughput speed of 110 megabits per second (Mbps) and low latency in the range of 10-20 milliseconds.

The end-to-end demonstration was based on Nokia Siemens Networks’ LTE equipment and software. These include the company’s award-winning Flexi Multiradio Base Station and Evolved Packet Core – which comprises Flexi NS (Network Server) and Flexi NG (Network Gateway) – and standard-compliant software.

TD-LTE technology promises enhanced delivery of broadband to laptops on the move and smartphone services, thanks to increased data rates, reduced latency and its scalable all-IP flat network architecture. This technology ensures high-speed mobile broadband connectivity and a superior performance from mobile applications across a wide range of devices.

“Today’s demo reiterates our leadership and commitment to getting TD-LTE into new market. It also demonstrates our regional and global progress in this area,” said Juha Lappalainen, head of mobile broadband sales at Nokia Siemens Networks. “Our TD-LTE trials across the globe prove our capability in driving rapid commercial TD-LTE network deployments aimed at facilitating a new wave of advanced mobile broadband services.”

“This is an important milestone in building the TD-LTE ecosystem in India,” added Urs Pennanen, head of India region, Nokia Siemens Networks. “TD-LTE over the Broadband Wireless Access spectrum is important for the country, as it will allow operators to offer voice and data to the masses. We are ready to collaborate with partners to accelerate our progress toward a comprehensive deployment of TD-LTE in India.”

Nokia Siemens Networks is at the forefront of TD-LTE development and commercialization, actively working with telecom operators and device manufacturers. The company is fully prepared and committed to support the LTE activities and is in talks with many operators globally. It is actively participating in tests and trials for both Frequency Division Duplex LTE (FD-LTE) and TD-LTE technologies, while working with telecom operators and device manufacturers to strengthen the ecosystem. Earlier this year, Nokia Siemens Networks successfully demonstrated TD-LTE trials during Shanghai World Expo, and TD-LTE data calls at the company’s R&D center in Hangzhou (China) and at Taiwan’s National Chiao Tung University.

Independent labs confirm Nokia Siemens Networks TD-LTE leadership [Aug 13, 2010]

  • Meets full TD-LTE test specifications defined by China’s Ministry of Industry and Information Technology
  • Conducts world’s first high-definition TD-LTE video call including handover with a Samsung TD-LTE device

Nokia Siemens Networks has proven its leading role in advancing TD-LTE as it met the complete TD-LTE test specifications defined by China’s Ministry of Industry and Information Technology (MIIT).The successful completion of the trial in the 2.3GHz band at the MIIT lab in Beijing, China, marks an important milestone in the commercialization of TD-LTE. After the test, Nokia Siemens Networks also achieved the world’s first high-definition TD-LTE video call, including handover, with a Samsung TD-LTE device.

The high-definition video call demoshowcased interoperability between Nokia Siemens Networks’ LTE infrastructure and Samsung’s TD-LTE USB dongle, and marks a definitive step toward ensuring early availability of a functioning TD-LTE ecosystem for commercial deployments.

“We’ve achieved excellent results from this test and are happy to partner with Nokia Siemens Networks in driving the TD-LTE ecosystem further,” said Mr. Tong Wang, president of Beijing Samsung Telecom R&D Center. “Commercial readiness of devices is a key indicator for the success of a new technology and the current test results show that we are now well prepared for TD-LTE.”

“Meeting TD-LTE test specifications defined by MIIT and achieving the first high-definition video call with handover, are key milestones in our list of achievements, added Paul Pan, head of Network Systems, Greater China Region, Nokia Siemens Networks. “We will continue to collaborate with partners to accelerate our progress toward a comprehensive deployment of TD-LTE.”

Nokia Siemens Networks is at the forefront of TD-LTE development and commercialization, actively working with telecom operators and device manufacturers. The company recently announced the first TD-LTE interoperability data call with a prototype TD-LTE USB dongle from Samsung and the first TD-LTE video call between Shanghai and Taipei.

Nokia Siemens Networks sets up industry’s first TD-LTE Open Lab [April 16, 2010]

Provides smart phone and terminal testing facility to accelerate TD-LTE ecosystem

Nokia Siemens Networks has inaugurated a TD-LTE Open Lab at its Hangzhou R&D facility. The first such lab in the industry aims to provide practical know-how that will help telecom operators and TD-LTE device manufacturers across the globe deploy commercial TD-LTE quicker. Major TD-LTE smartphone and terminal manufacturers can use the lab to test the interoperability and functionality of their devices across TD-LTE networks.

“The development of terminals and devices has always been a bottleneck in the roll-out of new mobile technology,” said Mr. Sha Yuejia, vice president of China Mobile. “We are thus more than happy to see that Nokia Siemens Networks has established a cutting-edge terminal testing environment, an initiative that we support wholeheartedly. After all, a healthy ecosystem needs efforts from all stakeholders.”

Nokia Siemens Networks’ Open Lab will provide an end-to-end testing environment for verifying the compatibility of terminals and devices with the company’s TD-LTE network products and solutions. The lab will also provide consultancy and testing services to device manufacturers. Nokia Siemens Networks’ TD-LTE R&D center in Hangzhou is fully integrated into the company’s global network of LTE Centers of Competence. It is an ideal location for the new Open Lab, as the company can use the R&D center’s existing competencies, resources and assets to speed deployment of TD-LTE.

“This initiative will facilitate the holistic development of TD-LTE technology,” said Wang Tong, chief technology officer of Samsung China. “We are working hard to build-up the TD-LTE ecosystem. TD-LTE Open Lab will provide us with a common testing platform to prove the interoperability of our terminals with its networks before commercial rollout.”

“We are at the forefront of driving TD-LTE deployments, as we were the first to conduct a call fully compliant with the 3GPP Release 8 (March 09 baseline) standard using commercial network hardware,” said Zhang Zhiqiang, president of the Greater China Region at Nokia Siemens Networks. “The TD-LTE Open Lab is a key cooperation initiative that will help us align our solutions with major user equipment vendors and ensure that our networks fully interoperate with their devices for the benefit of all TD-LTE operators.”

While Nokia Siemens Networks will focus on a quick ramp-up of the Open Lab by leveraging existing R&D teams and assets, it is also putting in place an expert pool of interoperability testing (IOT) professionals to ensure optimum quality standards and define a long-term strategy for the lab.

Providing a live TD-LTE experience to operators in the region, Nokia Siemens Networks also recently kicked off a nationwide TD-LTE road show in China. Beginning in Beijing, the road show will cover more than ten provinces in three months, demonstrating the most advanced TD-LTE technology and applications.

Nokia Siemens Networks drives development of TD-LTE [March 4, 2009]

Following the industry’s first lab based TD-LTE demonstrations last year R&D in Hangzhou is being ramped up to support its commercial roll-out

Nokia Siemens Networks is gearing up for the launch of next generation Time Division Duplex Long Term Evolution (TD-LTE) technology in China. Following the industry’s first successful lab demonstrations conducted with leading operators in Germany last year, the company has further expanded its team in Hangzhou, China, to support the commercial roll out of TD-LTE.

Nokia Siemens Networks’ Hangzhou R&D center plays a pivotal role for the company. As well as driving innovation across GSM/EDGE, WCDMA/HSPA, LTE, I- HSPA and WiMAX technologies, Hangzhou’s 1,000 strong R&D team is being expanded to focus on supporting China’s home-grown TD-LTE technology through 2009. The company has been cooperating with leading operators in China and Europe to evaluate the performance of TD-LTE technology under various deployment situations and will continue this work with more advanced over the air tests and finally field trials in a pre-commercial multi-cell test network.

The TD-LTE first phase tests were completed in November last year and demonstrated the high throughput performance, in particular peak data rates and low latencies, of TD-LTE under various channel conditions as well as the robustness of the technology. The tests confirm that users will truly enjoy the superior mobile broadband experience promised by the LTE standard even in unpaired frequency spectrum.

“TD-LTE can catapult China to advanced next generation mobile broadband services and we are committed to putting significant resources to support its development and deployment,” said Marc Rouanne, head of the company’s Radio Access business. “In addition to the significant boost in ground resources, our fast rollout service capability and experiences in the region will help us in delivering cost efficient and high quality next generation mobile broadband networks to the benefit of operators and end users.”

Nokia Siemens Networks has played a pioneering role in China’s home grown technology standard TD-SCDMA and has developed a well proven network solution for this technology. In addition, it provides comprehensive delivery capability in related network planning, construction and optimization projects. The company’s expertise in TDD technology gained through deploying credible and competitive TD-SCDMA solutions in China, coupled with our global leadership in LTE puts us in an extremely advantageous position in the region.

A forerunner in LTE, Nokia Siemens Networks has made a long-term commitment through significant financial and R&D investment, across both Frequency Division Duplex (FDD) and Time Division Duplex (TDD) mode of operations. The company was the first to demonstrate LTE technology with data speeds in the 160Mb/s range as well as a successful handover between LTE and HSPA as early as 2006. The company continued breaking records in 2007 by demonstrating multi-user field trials in urban environments with peak data rates of 173 Mb/s. Launched in February 2008, Nokia Siemens Networks’ LTE capable Flexi base station is already shipping since Q3 2008, far ahead of competition. It is also one of the key contributors for standardization of both LTE modes in 3GPP.

V. Alcatel-Lucent (with special emphasis on lightRadio and related QorIQ Qonverge SoCs from Freescale quite essential for that)

China Mobile selects Alcatel-Lucent for TD-LTE trial network at World Expo 2010 [Nov 18, 2009]

Alcatel-Lucent (Euronext and NYSE: ALU) today announced that it has been selected by China Mobile to deploy a TD-LTE* trial network at the occasion of the World Expo 2010 in Shanghai (May 1 to Oct 31, 2010). The deployment will be the first in the world and follows Alcatel-Lucent’s first TD-LTE call on a third party terminal achieved earlier this year. The agreement was signed through Alcatel-Lucent Shanghai Bell, Alcatel-Lucent’s Chinese flagship company.

Alcatel-Lucent‘s industry-leading TD-LTE platform will provide indoor coverage for 2 pavilions of World Expo 2010, namely the Theme pavilion and the Africa pavilion. Visitors will be able to enjoy advanced mobile services including ultra high speed internet access and HDTV at the exposition. Expected to have 200 participants and 70 million visitors, World Expo 2010 will open on May 1stnext year.

With the explosion of mobile data traffic that is underway today, service providers need to increase their wireless network capacity and to transform toward end-to-end IP networks in order to support a wide array of new revenue generating services while also driving down the operational cost of supporting the growing volume mobile broadband services. These needs are addressed by Alcatel-Lucent’s High Leverage Network™ architecture, which is intended to address the business, technical and operational challenges faced by service providers, enterprises and developers as they create, manage and market new applications. The High Leverage Network supports Alcatel-Lucent’s application enablement vision, which is focused on combining the trusted capabilities of service providers and enterprises with the speed and innovation of the Web to provide both consumers and business users with richer, more trusted and valuable experiences.

“China Mobile’s selection of our TD-LTE solution for this historical event further confirms that Alcatel-Lucent is playing a leading role in the evolution of 3G to 4G and that we are ready to help worldwide operators to take advantage of this technology,” said Olivia Qiu, President of Alcatel-Lucent Shanghai Bell and head of Alcatel-Lucent in East Asia.

LTE is the next evolution in mobile network standards defined by 3GPP (Third Generation Partnership Project) and supports operations in both the paired spectrum and unpaired spectrum. Alcatel-Lucent is a pioneer in the LTE market. It is able to provide common platform for both TDD and FDD spectrum, which creates a truly global ecosystem, and enables all operators to take advantage of a common system and unrivalled economies of scale as they look to provide 4G wireless broadband services to their subscribers.

In February 2009, Alcatel-Lucent announced that it has completed the first data calls – involving terminals from third-party suppliers – using TD-LTE technology, demonstrating Alcatel-Lucent’s commitment to supporting a smooth evolution path to 4G for all service providers.

* TD-LTE: Long Term Evolution (LTE) technology for Time Division Duplex (TDD) spectrum

For more information about Alcatel-Lucent’s LTE solution, please visit: http://www.alcatel-lucent.com/lte

Alcatel-Lucent achieves record speeds on World Expo China 2010 TD-LTE network [Feb 15, 2010]

Alcatel-Lucent (Euronext Paris and NYSE: ALU)today announced it has successfully achieved record speed rates on China Mobile’s TD-LTE (time division duplex – long term evolution) trial network – which is being installed to support the 2010 World Expo in Shanghai. During extensive tests, peak rates of more than 80Mbps downstream were realized by the team from Alcatel-Lucent Shanghai Bell, Alcatel-Lucent’s flagship company in China.The World Expo 2010, which will open on May 1stwith 70 million expected visitors, will provide a unique venue for all countries to demonstrate latest technological advances.

An industry’s first, these TD-LTE peak rates were achieved by using a single 20MHz spectrum band, carrying both the upstream and downstream traffic. And that’s an important differentiator versus previously announced breakthroughs in the LTE-FDD (frequency division duplex) space: the tests on China Mobile’s TD-LTE network show its readiness to cope with very high bandwidth demands as well, all while using half of the spectrum LTE-FDD networks require to accommodate peak throughputs of 100Mbps (downstream).

“These record speed rates on China Mobile’s TD-LTE trial network highlight Alcatel-Lucent’s commitment to providing our customers with an end-to-end LTE solution matching their specific spectrum and timing strategies,”said Romano Valussi, president of Alcatel-Lucent Shanghai Bell and head of Alcatel-Lucent’s China regional business unit. “Visitors to the event will thus be able to enjoy ultra high-speed mobile Internet access and experience the next generation of high-definition multimedia demonstrations. This will stimulate the worldwide adoption of TD-LTE technology, as well as its future commercialization.”

“Following the industry’s first TD-LTE calls performed in February 2009, this new milestone further reinforces Alcatel-Lucent’s ability to make TD-LTE a reality, and once again demonstrates the reliability of Alcatel-Lucent’s LTE solutions,” he added.

The tests were run using Alcatel-Lucent’s end-to-end LTE solution – including eNodeBs (base stations), evolved packet core (EPC) and a range of third-party commercial terminals. Alcatel-Lucent provided its professional services expertise, encompassing network installation and software integration.

This significant milestone comes at the same time as Alcatel-Lucent announcing good progress on the TD-LTE field trial in Shunyi (Beijing)- initiated by China’s Ministry of Industry and Information Technology (MIIT). Using third-party terminals and following a successful completion of all mobile file systems (MFS) tests, Alcatel-Lucent thus further proves the readiness of its end-to-end LTE solution.

LTE is the next evolution in mobile network standards defined by 3GPP (Third Generation Partnership Project) and supports operations in both the paired spectrum and unpaired spectrum. Alcatel-Lucent is a pioneer in the LTE market, having a common platform for both the time-division duplex (TDD) and frequency-division duplex (FDD) spectrums – that enables all operators to take advantage of unrivalled economies of scale as they look to provide 4G wireless services to their subscribers.

About Alcatel-Lucent and LTE
With 40 LTE customer trials secured to date, Alcatel-Lucent is a worldwide leader in LTE. The company is actively engaged in the majority of LTE projects being pursued by tier 1 operators around the globe. To help operators realize their potential, Alcatel-Lucent is offering a unique, pre-integrated, end-to-end LTE solution and a full set of associated professional services. Alcatel-Lucent’s network architecture is based on Alcatel-Lucent unique converged radio access network (RAN) strategy allowing scaling of W-CDMA networks and smooth evolution to LTE.The company also founded external linkthe ng Connect Program, a global initiative to drive the development of an open and diverse ecosystem of LTE device manufacturers, content providers and application partners. Through the ng Connect program and with Alcatel-Lucent’s end-to-end LTE solution, wireless broadband operators benefit from open innovation, pre-integrated solutions, reduce time to market with LTE-enabled services, and the ability to drive new and non-traditional business models.

For more information about Alcatel-Lucent’s end-to-end LTE solution, please visit:http://www.alcatel-lucent.com/lte

Alcatel-Lucent collaborates with Innofidei and ASTRI to complete the first high-definition video call over China Mobile’s TD-LTE network at World Expo [June 2, 2010]

Alcatel-Lucent (Euronext Paris and NYSE: ALU)and China Mobile today announced that they have successfully completed the first high-definition video call over a TD-LTE network at the Shanghai World Expo. Leveraging Alcatel-Lucent’s network infrastructure and systems integration expertise, as well as a TD-LTE USB dongle from Innofidei and ASTRI, World Expo visitors can experience a new class of ultra high-speed mobile services – including fast Internet access, significantly improved FTP upload/download speeds, 3D games and 3D maps.

As one of the key suppliers of China Mobile’s TD-LTE network at the Shanghai World Expo, Alcatel-Lucent is providing indoor broadband mobile coverage in the Theme and the Africa pavilions to the more than 70 million expected visitors. The achievement with Innofidei and ASTRI, both industry-leading TD-LTE terminal chip makers and recognized terminal vendors for China Mobile’s TD-LTE network, results from a series of successful interoperability tests aiming at an acceleration of TD-LTE’s commercialization.

“It is great to see the growth of TD-LTE in China. This achievement demonstrates that the TD-LTE industry chain is maturing, which will help boost the technology’s commercialization and global adoption,” said China Mobile’s TD-LTE EXPO project manager.

“This is a significant milestone for Alcatel-Lucent in the TD-LTE space. The successful interoperability tests, and resulting demonstrations with leading terminal vendors, further demonstrate our commitment to create an open TD-LTE ecosystem,” said Romano Valussi, president of Alcatel-Lucent Shanghai Bell and head of Alcatel-Lucent’s China regional business unit.

“As a major chip maker, Innofidei is actively participating in efforts to promote the TD-LTE industry. We launched our TD-LTE project in 2007, conducting further research with ASTRI. We were proud to see our efforts recognized by being awarded the bid for terminals for China Mobile’s TD-LTE network at the 2010 World Expo in Shanghai,” said Innofidei CEO Dr. Tom Zhang.

“Hong Kong ASTRI is determined to develop key technologies to benefit local and regional high tech industry. The cooperation with Alcatel-Lucent and Innofidei this time further illustrates our technology advance in TD-LTE” said Dr. Cheung Nim-Kwan, CEO of ASTRI.

In November 2009, Alcatel-Lucent was selected by China Mobile to deploy the first TD-LTE network in the world. This February, Alcatel-Lucent achieved record speedsof more than 80 Mbps downstream by using a single 20MHz spectrum band to accommodate both upstream and downstream traffic.

Alcatel-Lucent’s end-to-end LTE solution is a key element of its High Leverage NetworkTM architecture, providing sufficient capacity for the ever-growing data traffic at the lowest cost per bit, all with the intelligence necessary to create new business opportunities for our customers. The company’s end-to-end LTE network solution includes eNodeBs (base stations),its Ultimate Wireless Packet Core, IP/MPLS mobile transport, a comprehensive IMS solution and the ng Connect ecosystem with content and application vendors.

Having been selected to support more than 45 LTE trials around the globe and securing commercial contracts with two of the largest operators in the world, Alcatel-Lucent is a recognized market leader in LTE.

About Innofidei
Founded in Sept 2006 in Beijing Z-Park with operations in Beijing, Silicon Valley and Taipei , Innofidei dedicates itself to provide enabling IC and system solutions for mobile TV broadcast and telecommunication market.  external linkhttp://www.innofidei.com/

The Hong Kong Applied Science and Technology Research Institute (ASTRI) was founded by the Government of Hong Kong Special Administrative Region in 2000 to enhance technological advances for Hong Kong through applied research.  During the past years, ASTRI has been conducting a spectrum of world-class and customer-focused R&D, and has built teams of excellent researchers, produced a volume of intellectual properties and created real economic impact by transferring technologies to its clients in Hong Kong, the Mainland and the region.    Please visit external linkwww.astri.orgfor more information.

About Alcatel-Lucent and LTE
Having been selected to support 45+ LTE trials around the globe and securing commercial contracts with two of the largest operators in the world, Alcatel-Lucent is a recognized market leader in LTE. To help operators realize their potential, Alcatel-Lucent is offering a unique, pre-integrated, end-to-end LTE network solution and a full set of associated professional services. Alcatel-Lucent’s end-to-end network architecture is pre-integrating Alcatel-Lucent converged radio access network (2G/3G/4G RAN) and an industry-leading IP networking solution encompassing Alcatel-Lucent’s Ultimate Wireless Packet Core, IP/MPLS mobile transport, wireless network guardian, and a comprehensive IMS solution. This network solution allows scaling of GSM/W-CDMA networks and a smooth evolution to LTE. The company also founded the external linkng Connect Program, a global initiative to drive the development of an open and diverse ecosystem of LTE device manufacturers, content providers and application partners. Through the ng Connect Program and with Alcatel-Lucent’s end-to-end LTE solution, wireless broadband operators benefit from open innovation, pre-integrated solutions, reduce time to market with LTE-enabled services, and the ability to drive new and non-traditional business models. For more information about Alcatel-Lucent’s end-to-end LTE solution, please visit: http://www.alcatel-lucent.com/lte

Alcatel-Lucent and China Mobile together with Audi to bring the magic of LTE to the streets of Barcelona [Feb 15, 2011]

Alcatel-Lucent (Euronext Paris and NYSE: ALU) and China Mobile are collaborating to highlight a variety of high-value applications in an Audi A8 automobile supported by mobile network – based on Alcatel-Lucent’s commercially available infrastructure – that supports both flavours of Long Term Evolution (LTE) technology, Time Division Duplex (TDD) and Frequency Division Duplex (FDD), ensuring seamless global coverage.

In cooperation with Audi and application partners LiveCast and Vidyo, Alcatel-Lucent is bringing the magic of LTE to the streets of Barcelona with drive demos in a brand new LTE-driven Audi A8 cruising the neighbourhood around the Arts Hotel. From February 14th to 16th(9am-11:30am, 14pm-19pm), visitors will enjoy some exciting in-car services such as advanced street maps and navigation, video conferencing , video streaming, virtual desktop and music downloads.

“We are delivering a really cool driving experience in a really cool car using cutting-edge technology,” said Ken Wirth, President, 4G LTE Wireless Networks, Alcatel-Lucent. “What we are demonstrating is the ability of Alcatel-Lucent’s LTE Solutions to support the same kinds of advanced applications in both TDD and FDD spectrum, ensuring that all members of the LTE ecosystem can participate in the broader global value chain.”

The two modes of LTE share commonalities and are quite similar from an ecosystem perspective. The demonstrations also show the commercial readiness of Alcatel-Lucent’s integrated end-to-end LTE TDD and FDD solutions. This project also highlights the close collaboration between Alcatel-Lucent and China Mobile around the development of LTE; Alcatel-Lucent supported China Mobile’s TD-LTE trial network at World Expo in Shanghai last year and at public demonstrations of LTE at Mobile Asia Congress in November.

Alcatel-Lucent is supporting applications across both modes of LTE that are being deployed around the world in order to assist operators in leveraging LTE technology to develop a new range of connected devices and applications, including automobiles, to create new revenue opportunities and unleash new business models.  Through the ng Connect Program – which was launched by Alcatel-Lucent two years ago at Mobile World Congress – Alcatel-Lucent has pioneered the concept of the LTE in-vehicle connectivity and multi-industry ecosystem development. This year Alcatel-Lucent has worked directly with Audi to bring LTE enabled automobiles one step closer to commercial reality.

“Audi will make LTE technology a feature available in their commercial production line cars” explained Michael Dick, Board Member for technical development at AUDI AG, at the presentation of the experimental vehicle.

The drive demonstrations rely on Alcatel-Lucent’s end-to-end LTE converged solution comprising of common antennas, Alcatel-Lucent’s “zero footprint” base station (eNode B) and a Wireless Packet Core. In collaboration with Audi and application partners LiveCast and Vidyo we are showcasing how the network and applications like navigation, video streaming, virtual desktop, video conferencing, live broadcast and music downloads are integrated by our end-to-end LTE solution with both TDD and FDD coverage.

Vidyo is providing its revolutionary software-based telepresence technology for high-quality video conferencing demonstrations via TD-LTE, between passengers in the Audi A8 and people at the Mobile World Congress exhibit hall.

LiveCast’s industry proven live mobile video platform for enterprise is enabling HD quality video streaming with integrated telemetry and GPS location data, via TD-LTE from passengers in the Audi A8 to its LiveCast Command Center application at Mobile World Congress exhibit hall.

More applications will also be showcased in the Alcatel-Lucent’s booth at the Fira in Hall 6 and in the Apps Planet Hall 7 # 7A96 to highlight the commercial readiness of LTE and the transformation it will bring to many dimensions of our lives.

Having been selected so far by twelve customers for commercial deployments — including two of the world’s largest service providers — and being involved in over 60 trials worldwide –- including thirteen LTE TDD trials in seven countries — Alcatel-Lucent has established a strong leadership position in LTE.

More information about Alcatel-Lucent and LTE: http://www.alcatel-lucent.com/lte

Alcatel-Lucent and Sequans collaborate on LTE solutions [Feb 15, 2010]

Alcatel-Lucent (Euronext Paris and NYSE: ALU) and Sequans today announcedtheir collaboration on LTE solutions for operators of TD-LTE networks in Asia and Europe who are planning to offer services at 2.6 GHz. The first result of this collaboration in response to this significant demand will be a Sequans 2.6 GHz USB dongle to be used in operator trials in 2010.

“Through this partnership, we are exhibiting our commitment to creating a vibrant LTE ecosystem and to supporting operator goals of demonstrating the value of TD-LTE in delivering advanced services to end users,” said Georges Karam, Sequans CEO.  “Alcatel-Lucent is an LTE technology leader, already actively involved in some of the most significant LTE deployment projects announced to date and we are pleased to work with them.”

Alcatel-Lucent was previously selected by China Mobile to deploy China Mobile’s demonstration network at the World Expo 2010 in Shanghai, beginning of May, using Sequans TD-LTE chips and USB dongles at 2.3 GHz.

“We are committed to working closely with operators in Asia and Europe to support their LTE strategies,” said Doug Wolff, vice president, Alcatel-Lucent’s 4G/LTE Solutions. “Our collaboration with Sequans, a truly innovative and accomplished 4G semiconductor supplier, will yield valuable TD-LTE solutions”.

About Alcatel-Lucent and LTE
With 40 LTE customer trials secured to date, Alcatel-Lucent is a worldwide leader in LTE. The company is actively engaged in the majority of LTE projects being pursued by tier 1 operators around the globe. To help operators realize their potential, Alcatel-Lucent is offering a unique, pre-integrated, end-to-end LTE solution and a full set of associated professional services. Alcatel-Lucent’s network architecture is based on Alcatel-Lucent unique converged radio access network (RAN) strategy allowing scaling of W-CDMA networks and smooth evolution to LTE.The company also founded external linkthe ng Connect Program, a global initiative to drive the development of an open and diverse ecosystem of LTE device manufacturers, content providers and application partners. Through the ng Connect program and with Alcatel-Lucent’s end-to-end LTE solution, wireless broadband operators benefit from open innovation, pre-integrated solutions, reduce time to market with LTE-enabled services, and the ability to drive new and non-traditional business models. For more information about Alcatel-Lucent’s end-to-end LTE solution, please visit:http://www.alcatel-lucent.com/lte

About SequansCommunications
Sequans Communications is a 4G chipmaker, supplying LTE and WiMAX chips to equipment manufacturers and mobile operators worldwide.  Founded in 2004 to address the WiMAX market where it is now a global leader, Sequans has recently expanded to address the LTE market.  Sequans chips are inside the world’s leading WiMAX networks and will soon be inside the world’s leading LTE networks.  Sequans is based in Paris, with additional offices throughout the world, including USA, United Kingdom, Israel, Japan, Hong Kong, Singapore, and Taiwan. external linkwww.sequans.com

Alcatel-Lucent Asia Pacific President talks about Q1 2011 [May 20, 2011]

Alcatel-Lucent Asia Pacific President Rajeev Singh-Molares shares his perspectives about Q1 2011 in the Asia Pacific region. Business in the region grew relative to the same quarter last year. China and Japan were strong. Operators are aggressively rolling out LTE networks spurred by upticks in smartphone and tablet use. The company will collaborate with China Mobile on next-generation network development, leveraging cloud RAN and lightRadio. A study by Bell Labs and World Economic Forum reveals it’s possible to accelerate GDP growth by an additional 40% when combining applications and services with mobile ubiquity.

Alcatel-Lucent Columbus – Where LTE Readiness Becomes LTE Reality [March 2, 2011]

In 2010, Alcatel-Lucent deployed more than 60,000 base stations to North American customers. This video explains how our LTE Readiness Methods and Procedures team and our Remote Integration Testing Center (RITC) work together to deploy LTE technologies for our customers. The video also explains the concept of the RITC, its advantages for the customer and its track record of success. In addition, the video discusses the deep LTE expertise found in the Methods and Procedures team along with the many things it does to support the RITC.

lightRadio: Alcatel-Lucent at “Best Practice Live” virtual conference [July 5, 2011]

lightRadioTM is a disruptive Wireless Architecture that enables operators the opportunity to develop next generation converged 2G/3G/LTE Radio Networks. Valérie Layan – VP Wireless Solutions EMEA at Alcatel-Lucent outlined how this unique solution offers a dramatic new way of building networks that will enable Macro and Small Cell integration, offer Opex savings of more than 50% compared to Classic BTS design and set the course for Wireless & Wireline convergence.

lightRadio Press Coverage


The world’s first long-distance, high-quality mobile video-call using lightRadio™ – a breakthrough system pioneered by Alcatel-Lucent (Euronext Paris and NYSE: ALU) to transform the economics and efficiency of mobile telephony– has successfully taken place from the historic desk of Alexander Graham Bell.

Industry executives, technology leaders and analysts witnessed the inaugural lightRadio video call made from the headquarters of Bell Labs, the innovation engine of Alcatel-Lucent and now home to Graham Bell’s desk, from which he made the first-ever long-distance phone call.

Chris Lewis, Group Vice President of industry analysts IDC, hosted the call from Bell Labs in Murray Hill, New Jersey, connecting with Ben Verwaayen, Chief Executive of Alcatel-Lucent in Paris, and delegates at a business conference in Miami.

lightRadio is the name of a family of technologies which are set to transform mobile communications, improving the quality of network services for consumers while dramatically reducing the size, carbon footprint and energy consumption of mobile base stations.

After participating in the call, Ben Verwaayen, said: “We have taken lightRadio from the drawing-board to a fully working system, creating an entirely new system to connect customers around the world.”

The launch of lightRadio will help address exploding demand for mobile broadband services and increasing global consumption of wireless content. This has been fuelled by the adoption of smartphones and the popularity of video applications, social networking and mobile gaming services– all requiring wireless service providers to provide greater speed and capacity everywhere.

Network operators such as France Telecom/Orange, Telefonica and China Mobile are now engaged with Alcatel-Lucent in co-creating the market implementation of lightRadio. The system is expected to deliver significant operational savings for carriers and infrastructure owners by marking an end to the existing system of complex base stations and large cell towers.

This week’s inaugural call demonstrates lightRadio’s ability to handle high levels of data, meeting demand from customers increasingly using mobile video on Internet-networks. Among breakthroughs promised by the system, it will reduce mobile network energy consumption by 50% – compared with current equipment; enable roll-out of mobile broadband services to new marketsusing sustainable-power sources; and deliver major savings for operators.

Alcatel-Lucent predicts that lightRadio will help cut the cost of mobile infrastructure site, energy consumption, operations and maintenance. Bell Labs estimates that the total cost of ownership of mobile networks, the sum spent by mobile operators on access systems, reached 150 billion Euros in 2010.

More information about Alcatel-Lucent’s lightRadio portfolio can found online at http://www.alcatel-lucent.com/lightradio.

China Mobile and Alcatel-Lucent partner to develop next-generation RAN [Feb 15, 2011]

Alcatel-Lucent today announced it has signed a Memorandum of Understanding (MOU) with China Mobile, the world’s largest mobile operator and a leader in TD-SCDMA and TD-LTE, for the development of a next-generation radio access network (RAN). The MOU was signed by Alcatel-Lucent Shanghai Bell, Alcatel-Lucent’s flagship company in China.

Alcatel-Lucent and China Mobile will jointly launch technical and economic studies and investigate the technologies essential to build a centralized, collaborative, Cloud-based RAN (C-RAN) in order to set new standards for cost-effectiveness, network intelligence and energy-efficiency (“green”). The C-RAN will provide a common platform for multi-mode wireless standards such as GSM, 3G, and LTE, enabling to significantly improve network quality and coverage, reduce transmission resource consumption and lower OPEX by up to 50% and CAPEX by 15%.

Rajeev Singh-Molares, president of Alcatel-Lucent’s activities in Asia-Pacific said: “The partnership with China Mobile is directly addressing the challenges of high energy costs, explosion of mobile video and sustainable development. By helping them replace traditional network designs with flexible cloud-like architectures, we are preparing the future and help show the way in terms of technology and economic models.”

The strategic partnership for C-RAN will leverage Alcatel-Lucent’s recently-announced lightRadio, a breakthrough in mobile and broadband infrastructure to streamline and radically simplify mobile networks. Pioneered by Bell Labs, Alcatel-Lucent’s research and development arm, the new lightRadio system will dramatically reduce operating costs, technical complexity and power consumption.  This is accomplished by taking today’s base stations and massive cell site towers, typically the most expensive, power hungry, and difficult to maintain elements in the network, and radically reducing and simplifying them.

lightRadio represents a new architecture where the base station, typically located at the base of each cell site tower, is broken into its components elements and distributed through the antenna or the network for cloud-like processing.  Additionally the various cell site tower antennas are combined and shrunk into a single small powerful, Bell Labs-pioneered multi frequency, multi standard (2G, 3G, LTE) device that can be mounted on poles, sides of buildings or anywhere else there is power and a broadband connection.

The partnership with China Mobile also reflects Alcatel-Lucent’s strong commitment to sustainable development and to Green as testified, in particular, by its leading role in theexternal linkGreenTouch™ Consortium, a global research initiative dedicated to dramatically improving the energy efficiency of information and communications technology (ICT) networks by a factor of 1,000. GreenTouch™ recently presented a Large-Scale Antenna System proof of concept offering the potential for tremendous energy savings thanks to its novel wireless transmission techniques.

Alcatel-Lucent maps the future of mobile technology [Feb 7, 2011]

Alcatel-Lucent (Euronext Paris and NYSE: ALU) today announced lightRadio™, a breakthrough in mobile and broadband infrastructure that streamlines and radically simplifies mobile networks. The solution was unveiled at a major press launch event in London supported by partners Freescale and HP.

Pioneered by Bell Labs, Alcatel-Lucent’s unique research and development arm, the new lightRadio system will dramatically reduce technical complexity and contain power consumption and other operating costs in the face of sharp traffic growth. This is accomplished by taking today’s base stations and massive cell site towers, typically the most expensive, power hungry, and difficult to maintain elements in the network, and radically shrinking and simplifying them.

lightRadio represents a new architecture where the base station, typically located at the base of each cell site tower, is broken into its components elements and then distributed into both the antenna and throughout a cloud-like network. Additionally today’s clutter of antennas serving 2G, 3G, and LTE systems are combined and shrunk into a single powerful, Bell Labs-pioneered multi frequency, multi standard Wideband Active Array Antenna that can be mounted on poles, sides of buildings or anywhere else there is power and a broadband connection.

Alcatel-Lucent’s new lightRadio product family, of which initial elements ready to begin customer trials in the second half 2011, provides the following benefits:

  • Improves the environment: lightRadio reduces energy consumption of mobile networks by up to 50% over current radio access network equipment. (As a point of reference, Bell Labs research estimates that basestations globally emit roughly 18,000,000 metric tons of CO2 per year). Also, lightRadio provides an alternative to today’s jungle of large overcrowded cell site towers by enabling small antennas anywhere.
  • Addresses digital divide: By reducing the cell site to just the antenna and leveraging future advances in microwave backhaul and compression techniques, this technology will eventually enable the easy creation of broadband coverage virtually anywhere there is power (electricity, sun, wind) by using microwave to connect back to the network.
  • Offers major savings for operators: Thanks to lightRadio’s impact on site, energy, operations and maintenance costs; when combined with small cells and LTE, this new solution can lead to a reduction of total cost of ownership (TCO) of mobile networks up to 50% (as a point of reference, Bell Labs estimates that TCO spent by mobile operators in mobile access in 2010 was 150 billion Euros).

Ben Verwaayen, CEO of Alcatel-Lucent, said: “lightRadio is a smart solution to a tough set of problems: high energy costs, the explosion of video on mobile, and connecting the unconnected.”

Alain Maloberti, Senior Vice President, Network Architecture and Design, France Telecom/Orangesaid: “Alcatel-Lucent’s new vision and strategy of mobile broadband is quite exciting: the new wireless network architecture and innovative radio proposal will potentially help us to achieve significant operating cost savings and be better prepared for future challenges. We look forward to work closely with Alcatel-Lucent to explore and test this new approach.”

Tom Sawanobori, VP Technology Planning, Verizon Wireless, said: “Verizon looks forward to learning more about the benefits of lightRadio technology and how they could be applied as we continue to expand and evolve our LTE network.”

Alcatel-Lucent is also in advanced planning with China Mobileas well as a number of other carriers around the globe around co-creation and field trials of the lightRadio solution.

Alcatel-Lucent studies have concluded that the total addressable opportunity for the multi-technology radio market1, which lightRadio addresses, will be over 12 billion Euros in 2014, representing more than 55% of the total wireless RAN market. The cumulative total addressable market will be over 100 billion Euros from 2011-2018.

Alcatel-Lucent’s lightRadio portfolio integrates a number of breakthrough innovations and technologies from Alcatel-Lucent’s Bell Labs research arm and ecosystem of companies:

Market Impact Technology Innovation
A new generation of active antennas allows vertical beam-forming that improves capacity in urban and suburban sites by about 30%, supports all technologies (2G, 3G, and LTE) and covers multiple frequency bands with a single unit. lightRadio cube – A unique Bell Labs antenna technology, the lightRadio Cube includes an innovative diplexer type, radio, amplifier, and passive cooling in a small cube that fits in the palm of the hand.
By moving former basestation components to a System on a Chip (SOC), lightRadio places processing where it fits best in the network – whether at the antenna or in the cloud. System-on-a-chip (SoC) jointly developed with Freescale Semiconductor, integrates intelligent software from Alcatel-Lucent onto fully remotely programmable state-of-the-art hardware.
The economics of radio networks are substantially improved by reducing the number and cost of fiber pairs required to support the traffic between the antenna and the centralized processing in the cloud. Unique compression algorithms provide nearly a factor of three compression of IQ sample signals.
Matching of load to demand through ‘elastic’ controller capacity, delivered on sets of distributed and shared hardware platforms, will improve cost, availability, and performance of wireless networks. Virtualized processing platforms. Alcatel-Lucent will use innovative virtualization software and will collaborate with partners like HP to enable a cloud-like wireless architecture for controllers and gateways.

The lightRadio Product Family

The new Alcatel-Lucent lightRadio product family is composed of the following components: Wideband Active Array Antenna, Multiband Remote Radio Head, Baseband Unit, Controller, and the 5620 SAM common management solution. The Wideband Active Array Antenna will be trialed later this year and have broad product availability in 2012. Additional product family members will be available over 2012, 2013 and 2014.

For detailed information on these elements please as well as a webcast replay of today’s press conference please visit http://www.alcatel-lucent.com/lightradio(replay available at 2:30 pm GMT). The lightRadio approach and technology path will be shown and explained further at Mobile World Congress in Barcelona on 14-17 February.

[1] The multi-technology radio market consists of radio access base stations that simultaneously support 2G, 3G, and LTE, and multiple frequencies, in the same platform

“Alcatel-Lucent’s lightRadio approach is a revolutionary step in evolving traditional telecommunication networks to more heterogeneous networks with higher capacity and lower cost,” said Lisa Su, Senior Vice President and General Manager of Freescale’s Networking and Multimedia Group. “Freescale is collaborating with Alcatel-Lucent to provide the chip-based architectures through our new system-on-chip technology that supports the highly-flexible, multi-standard, programmable capability required to make lightRadio a reality.”

“Communication service providers will be better able to meet the shifting and growing demands placed on their networks as a result of the new lightRadio product family from Alcatel-Lucent,” said Sandeep Johri, vice president, Strategy and Solutions, Enterprise Business, HP. “As part of the lightRadio evolution, HP intends to work with Alcatel-Lucent in a co-creation fashion around the use of cloud and virtualization technologies in the mobile access space.”

“The day has finally come when service providers need to take a serious look at the road ahead in terms of technology and their economic models,” said Phil Marshall of Tolaga Research. “To survive and thrive, service providers must evolve network designs, embrace small cell sites and all-IP architectures and replace traditional network designs with flexible cloud-like architectures that can truly meet the data demands of the future.”

The Disappearing Mobile Masts and Towers [Feb 7, 2011]

The looming global gridlock in mobile communications promises to be averted following the launch today of pioneering technology which will remove the bottlenecks constraining mobile networks and help deliver universal broadband coverage.

Alcatel-Lucent (Euronext Paris and NYSE: ALU), the leading network technology group, has joined forces with industry partners to develop lightRadio™, a new system that signals the end of the mobile industry’s reliance on masts and base stations around the world.

Ben Verwaayen, Chief Executive Officer of Alcatel-Lucent, said: “Today’s and tomorrow’s demands for coverage and capacity require a breakthrough in mobile communications.”

He added: “lightRadio will signal the end of the basestation and the cell tower as we know it today.”

Governments and regulatory bodies are expected to welcome the technical development, which will help meet targets for universal broadband access by laying the foundation to address the so-called “digital divide.”

Other major benefits from lightRadio™ include:

  • Shrinking the carbon footprint of mobile networks by over 50%
  • Reducing the Total-Cost-of-Ownership of mobile operators by up to 50%
  • Improving end user services by significantly increasing bandwidth per user thanks to the deployment of small antennas everywhere

Wim Sweldens, President of Alcatel-Lucent’s Wireless Division said: “lightRadio will help mobile operators evolve their networks to address the mobile broadband deluge.”

lightRadio represents a new approach where the base station, typically located at the base of each cell site tower, is broken into its components elements and then distributed into both the antenna and throughout a cloud-like network.

lightRadio also shrinks today’s clutter of antennas serving 2G, 3G, and LTE systems into a single powerful, Bell Labs-pioneered antenna that can be mounted on poles, sides of buildings or anywhere else there is power and a broadband connection.

The innovation coincides with growing demand for third-and-fourth generation mobile networks and devices, involving the mass adoption of wireless television services and other forms of broadband content. The total addressable market for the radio technology necessary to serve such networks and devices is expected to exceed €100bn1over the next seven years.

Alcatel-Lucent announced the lightRadio™ technical specifications and launch timetable at an industry event in London today. Visit http://www.alcatel-lucent.com/lightradiofor product press release and link to event replay (available at 2:30 GMT).

[1] This is the total addressable market for multi-technology radio solutions that consist of radio access base stations that simultaneously support 2G, 3G, and LTE, and multiple frequencies in the same platform

Freescale introduces industry’s first multimode wireless base station processor family that scales from small to large cells [Feb 14, 2011]

Freescale Semiconductor – the communications processing leader and provider of industry-leading DSP technology – is transforming the future of wireless infrastructure equipment with the introduction of a highly integrated base station-on-chip portfolio built on advanced heterogeneous multicore technology. Freescale’s new QorIQ Qonverge seriesis the first scalable family of products sharing the same architecture to address multi-standard requirements spanning from small to large cells.

The explosion of smart connected devices with increasing data and video content has created a mobile data tsunami, requiring OEMs and carriers to dramatically boost network performance while controlling capital expenditure costs, increasing power efficiency and supporting the emergence of 4G technologies.

The QorIQ Qonverge portfolio of base station-on-chip products is based on a common architecture and integrates communications processing, digital signal processing and wireless acceleration technologies into a single system-on-chip in various configurations optimized for next-generation femtocell, picocell, metrocell and macrocell base stations. Advanced process technology and exceptional integration allow the convergence of multiple functions traditionally performed on separate FPGAs, ASICs, DSPs and processors to be incorporated on a single device. This integration lowers part counts and delivers significant power, cost and footprint reductions for base stations. The common architecture spanning from femto cells to macro cells optimizes R&D investments and software reuse.

“The current explosion in mobile data traffic worldwide provides unique challenges and opportunities for wireless infrastructure equipment providers as they race to increase capacity and capability,” said Lisa Su, senior vice president and general manager of Freescale’s Networking and Multimedia Group. “Freescale’s highly integrated QorIQ Qonverge portfolio enables base station manufacturers to provide a dramatic, step-function improvement in performance, power and cost in a single, flexible architecture.”

QorIQ Qonverge technology can deliver 4x cost reduction and 3x power reduction for LTE + WCDMA macro base stations, and 4x cost and power reductions for LTE + WCDMA pico base stationswhen compared to wireless infrastructure equipment powered by discrete silicon products.

“By integrating multiple industry-leading technologies into one scalable product line, Freescale’s QorIQ Qonverge portfolio delivers significant innovation that advances the state of wireless networking at this pivotal time for the industry,” said Will Strauss, president and principal analyst of Forward Concepts. “The QorIQ Qonverge portfolio presents a unique solution and strengthens Freescale’s position as a processing technology leader in the wireless infrastructure space.”

Freescale leveraged its broad R&D scale, deep application knowledge of the wireless space and extensive IP portfolio to develop the new product family. QorIQ Qonverge processors combine multiple Power Architecture® cores and high-performance StarCore DSPs with a MAPLE multimode baseband accelerator, packet processing acceleration engines, interconnect fabric and next-node process technology. The portfolio’s products support multiple standards, including GSM, LTE – FDD & TDD, LTE-Advanced, HSPA+, TD-SCDMA and WiMAX. In addition, the family’s flexible architecture allows support for evolving standards with software upgrades.

“Freescale’s innovative QorIQ Qonverge platform provides the integration, performance, energy efficiency and unmatched scalability that our new lightRadio™ product portfolio requires,” said Wim Sweldens, president of Alcatel-Lucent’s Wireless Division. “Game-changing products like lightRadio disaggregate the base station between the network and the wideband active antenna, produce dramatic cost savings and need components that provide giant leaps forward such as Freescale’s new QorIQ Qonverge technology.”

“Freescale’s QorIQ Qonverge product line gives us the flexibility to cost-effectively address the widest possible small cell market by providing a common architecture and multimode capabilities, along with the programmability for us to incorporate our own advancements,” said Michael Clark, Airvana’s general manager for femtocell business. “We look forward to working with Freescale to help accelerate the deployment of small cells in next-generation wireless networks.”

According to analyst firm Infonetics, radio access network base station spending is projected to be $197 billion worldwide over the next four years.

Complete solutions
Customers can develop best-of-breed solutions with ease by combining their own differentiated IP with off-the-shelf components from Freescale and ecosystem partners. Freescale has assembled a rich ecosystem of technology leaders focused on wireless applications. Products and services from these partners can be combined with third party tools, as well as Freescale’s CodeWarrior technologies and VortiQa application software. This ecosystem can provide ODMs and OEMs Layer 1 – 4 software, transport and security stacks, RF technologies, test and measurement capabilities and ODM solutions.

A development platform based on the P2020-MSC8156 AMC bundled with partner software and RF solutions is available immediately for rapid software development. In addition, Freescale offers a wide portfolio of GaAs MMICs and LDMOS RF solutions for consumer and enterprise pico and femto cells.

QorIQ Qonverge products
The QorIQ Qonverge portfolio includes four distinct products optimized for small cell (femto and pico) and large cell (metro and macro) applications. It also supports remote radio head and emerging cloud-based radio access network (C-RAN) configurations.

The first products in Freescale’s QorIQ Qonverge multicore portfolio are built in 45-nm process technology and planned for availability in the second half of 2011. The products are the PSC9130/PSC9131 femto SoCs and PSC9132 picocell/enterprise femto SoC devices. Freescale plans to introduce portfolio members targeting larger cell (metro and macro) base stations built in 28-nm process technology later this year.

PSC9130/31 Femto SoC

      8-16 users (WCDMA, LTE, CDMA2K) and simultaneous multimode
      2×2 MiMO
      1x e500 and 1x SC3850
      MAPLE-B2F acceleration

PSC9132 Pico/Enterprise Femto SoC

      32-64 users (WCDMA, LTE) and simultaneous multimode
      2×4 MiMO
      2x e500 and 2x SC3850
      MAPLE-B2P acceleration

About Freescale Semiconductor
Freescale Semiconductor is a global leader in the design and manufacture of embedded semiconductors for the automotive, consumer, industrial and networking markets. The privately held company is based in Austin, Texas, and has design, research and development, manufacturing and sales operations around the world. www.freescale.com.

Supporting Partner Quotes Follow

“Enea currently provides a breadth of leading software solutions to support Freescale’s extensive portfolio of networking IP,” said Marcus Hjortsberg, vice president of Marketing for Enea. “We look forward to playing a role in unleashing the innovative capabilities of Freescale’s new QorIQ Qonverge hybrid multicore portfolio.”

Green Hills
“With a long history of optimized support for Freescale’s multicore and multiprocessor platforms, we are excited to see Freescale’s next-generation wireless base station solution,” said Dan Mender, vice president of Business Development, Green Hills Software. “QorIQ customers use our multicore development tools and scalable real-time operating systems, MULTI and INTEGRITY, to conquer today’s multicore challenges and we look forward to supporting them as they adopt the QorIQ Qonverge portfolio.”

Mentor Graphics
“The integration of StarCore DSP technology with Power Architecture cores in the new Freescale QorIQ Qonverge portfolio is a major advancement for the wireless industry. We see great potential for this class of heterogeneous multi-core designs,” said Glenn Perry, general manager of the Mentor Graphics Embedded Software Division. “The Mentor Embedded Linux platform for Freescale devices combined with CodeSourcery software development tools will enable our mutual customers to develop advanced, innovative and scalable systems with increased performance and power efficiency.”

“We are thrilled to be partnering with Freescale to accelerate development of new best-in-class solutions in the wireless infrastructure market,” said C.P. Murali, executive vice president and general manager at Aricent. “Our comprehensive suite of software frameworks and product engineering services enable customers to rapidly introduce innovative solutions based on Qonverge technology.”

Continuous Computing
“We are proud to be a member of Freescale’s technology partner program and for Freescale to be a member of the Continuous Computing Network,” said Todd Mersch, director of Product Line Management at Continuous Computing. “Together we offer customers a complete range of femto to macro base station solutions consisting of Trillium wireless software and the latest advances in the QorIQ Qonverge portfolio of processors.”

Critical Blue
”Freescale’s QorIQ Qonverge platform is architecturally very innovative. Meeting next-generation network speed requirements will require software developers to make knowledgeable choices in application partitioning and task allocation to the different types of cores on these platforms,” said David Stewart, chief executive officer of CriticalBlue. “The development program we have ongoing with Freescale will ensure that our Prism tool has all the capabilities needed to support a smart methodology for software developers, enabling them to get the maximum benefit from targeting the QorIQ Qonverge platform.”

L&T Infotech
“L&T Infotech is excited to collaborate and build world-class wireless solutions based on Freescale’s QorIQ Qonverge portfolio,” said Sudip Banerjee, chief executive officer for L&T Infotech. “Our end-to-end telecom proficiency spans the entire wireless domain, with proven expertise on LTE/WiMAX, multicore technologies, network security and optical transport networks, ultimately enabling accelerated time-to-market for our client’s products.”

“We are pleased to support Freescale’s QorIQ Qonverge portfolio with our world-class wireless test technologies to ensure high-performance equipment, service and end-user experiences,” said Tim Hentschel, managing director for Signalion GmbH. “Freescale is charting new territory with the QorIQ Qonverge hybrid portfolio that promises to transform the future of wireless infrastructure equipment.”

“The introduction of theQorIQ Qonverge portfolio means OEMs now have a single-architecture, compatible family of products to address all their base station design needs,” said Shyam Ananthnarayan, head of the Communications Business Unit at Tata Elxsi. “As a key member of Freescale’s rich ecosystem, Tata Elxsi will offer market-leading LTE eNodeB software stacks optimized to ease customers’ development of best-of-breed solutions based on Qonverge technology.”

Wireless support and network functions converge in QorIQ Qonverge processors [By Tom Thompson, June 16, 2011]

Wireless communication seems ubiquitous these days–until you wander into a dead zone and lose the network connection to your laptop, tablet, or mobile phone. Telco carriers are working hard to eliminate such areas by installing more macrocell towers. Sometimes installing one of those big bruisers in an area isn’t possible, so the carriers fill in the coverage gaps by scaling down. Scaling down in this case means building smaller wireless installations, such as microcell (also known as metrocell), picocell, and femtocell base stations.

You don’t have to be a rocket scientist to realize that deploying such a diverse array of gear can be a nightmare, both in terms of hardware design, embedded software development, and support. Every base station has various wireless formats to manage, and the smaller base stations must also implement certain wired backhaul technologies such as Ethernet and ET/T1 so that they can connect to the carrier’s infrastructure. One way to alleviate this headache of multiple base station designs is to reduce the different types of hardware used. For this scheme to work, however, the signal processing capabilities of a DSP and the networking functions of an application processor must converge into one unified part.

Freescale happens to be well-positioned to provide such a converged solution. First, the company makes its StarCore DSPs, which are 32-bit multicore processors engineered for high data processing throughput and support for a variety of wireless protocols. Second, the company makes high-performance network processors, notably those that comprise its QorIQ Processing Platform. These are 32-bit processors based on a low-power, high-performance Power Architecture core that manages several high-speed communications interfaces. Variants of both the StarCore and Power Architecture families feature fewer cores or lack hardware accelerators, which enable them to hit a specific price point or power consumption target.

Freescale’s convergence strategy is simple in concept, yet presented an engineering challenge. First, you take the core subsystems of these two processors and place them on a single chip. Next, surround the cores with a bevy of enhanced communications interfaces. Finally, knit all of these elements together with a high-speed switching fabric. The result is the QorIQ Qonverge processor, a system that is essentially a base station on a chip. Let’s delve deeper into the microarchitecture of the QorIQ Qonverge and see how it offers a comprehensive solution.

A Tale of Two Processors

The block diagram in Figure 1 depicts the major logic blocks that make up the QorIQ Qonverge PSC3191E, a part suitable for femtocell and picocell base station designs.

Figure 1

Figure: Block diagram of the QorIQ Qonverge PSC9131E processor.

The StarCore subsystem consists of an SC3850 DSP core that has six execution units(four data ALUs, and two address units) that operate in parallel to retire six instructions simultaneously per clock. The ALUs support integer and fractional arithmetic, including multiply-accumulate (MAC) and other sophisticated instructions. The core is therefore capable of reading, processing, and writing a continuous stream of data. The subsystem has its own internal L1/L2 caches, an MMU, an interrupt controller, and timers.

The Power Architecture subsystem consists of an e500 core, which is a superscalar processor with multiple execution units that can issue and retire two instructions per clock cycle. It has its own internal L1/L2 caches, an interrupt controller, and timers.

Each core has separate 32 KB instruction and data caches to reduce latency and boost throughput. The Harvard architecture implementation of these caches requires more transistors, but it helps to ensure that the cores receive a continuous stream of data and instructions. The unified L2 caches can be configured so that a portion of them acts as a low-latency L2 memory for time-critical data or variable storage.

Both subsystems would grind to a halt if they could not access memory or peripheral devices rapidly. To minimize this bottleneck, a high-performance communications interface, known as the Chip-Level Arbitration and Switching System (CLASS) fabric was used. This high-bandwidth, low-latency switching fabric is a fully-pipelined, device interconnect that provides direct access to the resources of the subsystems and on-chip peripherals.

The DMA engine, which can be programmed by either core, uses the CLASS fabric to manage data transfers. It has four bidirectional channels. Off-chip memory is accessed through a DDR memory controller. The controller supports DDR3/DDR3L devices, and can manage a 32-bit interface at a maximum 800 MHz data rate.

Hardware Gives a Hand

As you can see, the QorIQ Qonverge processor is one busy piece of silicon. Among its many duties is to process various wireless formats and encrypt communications sessions. These wireless and encryption algorithms are complex and require substantial processing power. While they can be done in software, the QorIQ Qonverge processor has dedicated execution units that can off-load the computational demands of these algorithms from the core subsystems.

The Multi Accelerator Platform Engine for Femto BaseStation Baseband Processing (MAPLE-B2F) unit provides hardware acceleration for baseband algorithms such as channel decoding/encoding, UTMS chip rate processing, and LTE uplink/downlink processing. It also accelerates the computation of Fourier transforms, matrix inversions, CRC algorithms, convolution and filtering operations, Turbo encoding/decoding, and Viterbi decoding. It is a second-generation design that builds upon an established predecessor used in certain StarCore DSPs.

For encryption duties there is the security engine, a cryptographic and assurance acceleration unit. It uses a job queue interface that can schedule multiple cryptographic tasks in parallel, and its multiple accelerators can be shared among different applications. In concert with the DMA engine, this module can use scatter/gather operations to collect data that is distributed throughout memory. The module has hardware accelerators for public key, message digest, ARC four, SNOW 3G f8 and f9, and Katsumi cryptographic operations. It also has accelerators that manage DES, AES, and CRC operations, and it supports a variety of cryptographic authentication schemes.

Note that acceleration capabilities are not limited exclusively to these particular modules. Other modules can accelerate a subset of their functions. For example, the Ethernet controller can off-load and accelerate certain TCP/IP stack operations such as IP header recognition and checksum, plus TCP/UDP checksum and verification.

Smart Controllers

The PSC9131E has several controllers that manage complex I/O operations concurrently. The Antenna Interface Controller (AIC), as its name implies, handles transactions between the processor and an external Radio Frequency (RF) subsystem. It supports CDMA, WCDMA-DD, LTE-FDD, LTE-TDD, and GSM (receive only) network modes. Data received from the transceiver is reformatted and stored by the AIC into system memory or in the MAPLE-B2F unit. Data to be transmitted is transferred by DMA to the AIC where it frames the data for the proper network format and sends it to the transceiver. The AIC can handle up to a maximum of four data lanes, depending upon the wireless format in use.

The Ethernet controller features two enhanced Gigabit Ethernet interfaces that can operate at speeds of 10 Mbps, 100 Mbps and 1 Gbps. These interfaces are IEEE 802.3, 802.3u, 820.3x, 802.3z, 802.3ac, and 802.3ab compliant. As mentioned previously, the controller can accelerate the identification and retrieval of standard and non-standard protocols present on the Ethernet connection.

The USB controller is USB revision 2.0 compliant and can function as both a host and a device controller. As a host, it supports low-, full-, and high-speed transfer rates. It contains its own DMA engine that reduces the interrupt load on the processor and minimizes the bus bandwidth necessary to service any USB transactions.

In summary, these several controllers provide sophisticated wireless, Ethernet, and USB services, yet without adding a considerable burden to the processor’s operation, especially when it is conducting network/wireless routing.

Ports Aplenty

The PSC9131E provides a number of ports that enable you to connect a large cast of supporting peripherals to the processor. These are:

  • Enhanced SPI
  • Two DUARTs
  • Integrated Flash memory Controller (IFC)
  • Two I2C controllers
  • General-Purpose I/O (GPIO) interface with 32 bidirectional ports
  • Universal Subscriber Identity Module (USIM) interface for communicating with a SIM card
  • PWM optimized to generate sound
  • Enhanced Secured Digital Host Controller (eSDHC) for interfacing to SD/SDIO/MMC cards

As a unit, QorIQ Qonverge processors represent a fusion of many existing, field-proven Freescale technologies. However, the resulting processor is far greater than the sum of its parts. Since the QorIQ Qonverge processor implements the level-1, -2, and -3 processing layers required for network/wireless communications on-chip, it only lacks some external hardware, such as a power supply, flash memory, DRAM, Ethernet line-driver and a RF transceiver to implement a stand-alone femtocell or picocell base station. It is designed to replace both the DSP and the applications processors at the heart of many such base station designs, as shown in Figure 2. By doing so, the QorIQ Qonverge part can reduce complexity, processing latencies, and the bill of materials for a base station design.

Figure 2. The QorIQ Qonverge-based picocell design (bottom) uses fewer parts than a design based on separate DSP and application processors (top).

A Processor for Many Uses

The QorIQ Qonverge processor isn’t limited to short-range base stations, however. It can also scale up: Multicore variants can support microcell and macrocell base station designs. This allows you to assemble a range of base station designs around one part.

Besides simplifying the base station design, the QorIQ Qonverge processor also allows you to reuse existing software. For example, existing StarCore MSC8156 DSP code and P2020 application code can be migrated to the QorIQ Qonverge processor, since the cores are nearly identical. The same CodeWarrior tool suite for StarCore DSPs and CodeWarrior tools for Power Architecture can be used to write and debug the software. Furthermore, the code written for–say, a picocell base station–can be reused in microcell and macrocell base station designs. Revising the code for a multicore processor can be tricky, but you can start the process with the knowledge that the application code was stress-tested on smaller base stations. Also, Freescale’s partner, CriticalBlue, has a multicore simulation tool to assist you in this process for Power Architecture-based software. All of this adds up to be a comprehensive solution for embedded base station designs.

Turn the lightRadio on [March 8, 2011]

Development hopes to double network capacity while halving power consumption. By Roy Rubenstein.

Mobile operators face significant challenges, given the rapid growth in mobile broadband traffic. They are starting to roll out the latest mobile technology, Long Term Evolution (LTE), as yet another overlay alongside the existing wideband CDMA and GSM networks. Mobile sites are thus being crammed with antennas and basestation equipment.

The cellular network is 30 years old,” said Tom Gruba, marketing director for wireless activities at Alcatel-Lucent. “You cannot just keep adding more basestations in the network to solve the [data] capacity problem; the business model doesn’t work.” Alcatel-Lucent’s solution is lightRadio, which moves the processing power to the antenna or into the network, like cloud computing. The system vendor points out that architecture change is being industry led; what Alcatel-Lucent is claiming is that the lightRadio portfolio of products is the first to support the new architecture.

Announced in the run up to Mobile World Congress 2011, lightRadio promises to double network capacity, while halving power consumption. The lightRadio products include a wideband active array antenna that integrates the amplifier and antenna elements, a radio SoC developed with Freescale, and a multimode radio controller platform being developed with HP. Integrating the amplifier alongside the antenna achieves better coupling of the signal to the antenna. Less power is wasted, such that a smaller amplifier can be used.

Alcatel-Lucent - lightRadio The wideband active array antenna is implemented as a 6cm cube, pictured left. The wideband operation covers 400 to 4000MHz, allowing one cube to support 700MHz and 2600MHz bands. “These can be stacked, depending on how much power is needed, and you can have two or three columns to serve two or three frequencies and any technologies you want,” said Gruba.

Being an active design, the antenna boosts cell capacity through beam forming and multiple input, multiple output (MIMO) technology. Combining the amplifier-antenna with the radio chip forms a compact basestation that can be mounted on masts or within buildings. Such a combined baseband/remote radio head takes little space and avoids the need for air conditioned cooling associated with traditional basestations.

LightRadio will also enable a cloud computing style radio network architecture, where the basestation is separated from the antenna-amplifier. Traditionally, the radio amplifier was connected to the baseband via a backplane. The advent of the remote radio head led to the creation of the common public radio interface (CPRI) to connect the amplifier at the antenna with the baseband unit. With a cloud based radio network, basestations from 25 or 30 cell sites could be placed in a facility up to 40km away, with the CPRI signal carried over an optical link.

Alcatel-Lucent estimates the maximum lightRadio bit stream needed to be carried over the CPRI link is 10Gbit/s. Compression technology will reduce this by a factor of three, so operators can avoid installing a dedicated 10Gbit optical link. At the core of the baseband processing is the SoC developed with Freescale.

“Dimensioning the various aspects of the SoC is critical,” said Preet Virk, Freescale’s director, networking segment. The SoC design uses Freescale’s recently announced QorIQ Qonverge technology that supports designs spanning femtocells to macro basestations. Two devices have been announced – for femtocells and picocells – that are implemented using a 45nm cmos process. Alcatel-Lucent’s radio ic will be implemented in 28nm cmos and will be available from 2012.

Freescale is not willing to detail the basestation SoC yet, but the scalable design uses cores and IP blocks that are shipping in Freescale products, such as the e500 Power Architecture core and the StarCore SC3850 dsp as well as baseband acceleration blocks.

“Scalability comes in many forms,” said Barry Stern, Freescale’s baseband DSP & SoC products, marketing manager, wireless access division, networking and multimedia group. “From a few users to hundreds of users; from 1.25 to 20MHz bandwidths and beyond; simultaneous multimode support; and enabling OEMs to use the same software across different basestation designs, saving on development costs.”

Freescale’s femtocell SoC supports 8 to 16 users and uses an e500 core and a dsp core. The picocell SoC supports 32 to 64 users and uses two e500s and two dsp cores. Freescale’s metro and macro cell SoCs will support hundreds of users, requiring multiple dsp and cpu cores. Other features will include several DDR3 memory controllers; baseband acceleration for turbo coding, fast Fourier transforms and MIMO; and interfaces for Ethernet, PCI Express and CPRI, according to Virk.

“The SoC in the cloud is going to give us the ability to do all sorts of new things,” said Tod Sizer, head of Alcatel-Lucent’s Bell Labs’ wireless research domain.

Intercell communication

Having baseband processors concentrated at one location enables intercell communication. One application is Coordinated Multipoint (CoMP), what Alcatel-Lucent calls networked MIMO, which will be a feature of the 3rd Generation Partnership Project’s (3GPP) Release 10 cellular standard.

Currently, only one cell serves a user, even if the user is commonly near the cell edge and is sensed by adjacent cells. With CoMP, MIMO technology can be used such that different streams are transmitted between the basestations and the user, boosting throughput. And it is this technique, says Alcatel-Lucent, which will double overall capacity.

The cloud like architecture will also enable new uses that benefit energy consumption. “One we are going to see in the coming years is coordination on the basis of energy usage,” said Sizer, citing how, for example, all users could be moved to the 3G network, with the LTE basestations turned off to save power, based on time of day and subscriber requirements. “You have that capability of moving users if you have control of both technologies from a single cloud,” said Sizer.

Power consumption has become a key issue for operators, with the likes of France Telecom looking to reduce the energy consumption in its network by 15% by 2020. In turn, US operator Verizon stipulates that each new piece of equipment must be at least 20% more energy efficient than its predecessor if it is to be deployed. Alcatel-Lucent is developing a virtualised radio controller architecture as part of the portfolio, working with HP to consolidate three generations of radio controllers into one platform. In GSM, the basestation controller (BSC) connects to multiple cell sites, while a radio network controller (RNC) is used in 3G.

“If I make the BSC or RNC a software routine, the software becomes independent of the platform and I can put both functions in one box,” said Gruba. Alcatel Lucent is basing the design on an ATCA version 2 based general purpose processor design, while HP is providing server and virtualisation expertise to the controller design. Alcatel-Lucent expects to be trialling the wideband active array antenna in the autumn before it becomes commercially available in 2012.

The remaining lightRadio elements will appear from 2012 onwards. Ken Rehbehn, principal analyst at the Yankee Group, says lightRadio is arguably the most important wireless equipment development made by Alcatel-Lucent since its 2006 merger. However, he points out that other vendors are pursuing comparable strategies that might challenge much of the lightRadio vision.

lightRadio: hideous cell towers to get smaller, lose the “hut” [Feb 2011]

Cell TowerEven when they’re disguised like fake trees or church steeples, cell towers are ugly. Most have a hut at the bottom, stuffed with baseband processing gear that does the hard work of creating and decoding, say, an LTE signal. These huts often contain signal amplifiers, big units that push power up the tower to the actual antennas—and half the signal is lost just moving through the tower’s wiring. At the top, rectangular antennas bristle from the tower. One set might be for 2G support, one for 3G, and another for 4G.

Alcatel-Lucent, one of the world’s biggest wireless gear makers, turned to its Bell Labs research division to rethink this aging architecture. First step: apply the “data center” model of centralization to baseband processing and consolidate all that rack-mounted hardware into a few locations per city, each connected to the towers it serves by fiber optic cable.

Right now, a cell tower fault might require a truck roll and a drive through traffic. When the tech gets to the tower site, it might turn out to be at the top of a hotel, and permission to access it must be obtained from the site manager. Put all the processing gear in a single remote location, however, and repairs to it get cheaper and faster.

Clustering the baseband units also makes it easier to do load balancing across a region. When commuters are driving into work, for instance, the baseband cluster can turn its combined energy to handling the signal load coming from towers along the highways and train lines. During the day, processing could handle heavy downtown traffic, while it shifts focus to the suburbs in the evening. Such load-balancing doesn’t produce any additional spectrum or data throughput, but it does mean that a carrier can operate fewer baseband processors, saving the carrier cash.

The third advantage to centralizing the baseband processors is that the interconnection fabric between them can operate at high speeds, fast enough to support a standard called CoMP, or Co-ordinated Multipoint. CoMP, which is currently moving through standardization, relies on the fact that, in many locations, a user’s wireless gadget is in range of multiple towers (the closer one comes to the edge of each cell, the more towers can typically see the device).

This is usually a waste, since multiple towers spend bandwidth contacting the gadget but can’t independently deliver different data. CoMP turns it into a bonus by dividing up requested download data and using all cells in the area to deliver a different slice of it at once—akin to the way BitTorrent operates. The phone then combines the data from all the towers in the proper order. This additive approach to using different towers means that a user’s total throughput can go up substantially, but it requires centralized baseband to function.

Finally, the new lightRadio baseband bear can do software-defined protocols. Upgrading to LTE? Just upgrade the software on the baseband processor. (Traditional rack-mounted baseband processors required dedicated units for each protocol.) A new baseband chip from Freescale makes it possible, but it gets even cooler when used in conjunction with the new wideband antennas.

LightRadio uses a new antenna that, in Alcatel-Lucent’s words, collapses three radios into one. The radios are tiny cubes of 2.5 inches square, and each can operate between 1.8GHz and 2.6GHz. They use tiny amps that can be located atop the tower, built into the antenna enclosure, which keeps the amp size down and dramatically cuts down on the power loss.

These radio cubes are stacked in groups of 8 to 10 in order to make an antenna element, and when one cube in the array goes down, the others remain unaffected. (In a traditional system, the whole antenna unit would fail.) The amps cover enough different frequencies that, in many cases, simply changing the software configuration on the baseband unit can control whether each antenna offers a 2G, 3G, or 4G signal.

The antennas also do “beam forming”—fine-grained directional control over the radio signal—in both the horizontal and vertical dimension to better connect with local wireless devices. Alcatel-Lucent claims capacity improvements of 30 percent through the use of vertical beam-forming alone.

The end result of the system: lightRadio cell towers don’t need huts, they don’t need air conditioners and heaters, big amps, fans, or even local processing gear. Baseband processing moves closer to the data center model and gets cool new capabilities like CoMP and load-balancing. The system’s cost savings come from power (Alcatel-Lucent claims a 50 percent reduction), along with lower construction and site rental fees. The total macro capacity of the system should double while cutting operator costs dramatically.

Though it will take months for any carrier to roll out this or similar gear, advances like lightRadio are crucial as wireless usage continues to soar and smartphones break out of the enterprise and the technorati and into the mainstream. And by making cell infrastructure smaller, cheaper, and less power-hungry, this sort of gear brings wireless networking into reach of more people, especially in rural areas and developing countries.

Alcatel-Lucent’s lightRadio™ portfolio wins NGN magazine leadership award for transforming mobile broadband networks [May 19, 2011]

Alcatel-Lucent (Euronext Paris and NYSE: ALU) today announced that its lightRadio portfolio was recognized as the outstanding new achievement in broadband Internet communications by the leading industry magazine NGN, as part of its NGN Leadership Awards contest. The awards program recognizes outstanding products, services and technologies relating to next generation networks.

“This award underlines the sweeping impact our lightRadio portfolio is having on the wireless communications industry,” said Wim Sweldens, President of Alcatel-Lucent’s Wireless activities.  “lightRadio isn’t just redefining the shape of the wireless base station, it also offers a compelling vision for what wireless networks will look like in the future.”

“This award for Alcatel-Lucent’s LightRadio is a great testament to their innovation.  They have brought to market a solution designed to solve the most critical issues facing the wireless industry, starting with the quasi impossibility to add new sites to increase capacity and improve coverage,” said Stéphane Téral, Principal Analyst, Mobile and FMC Infrastructure, Infonetics.

lightRadio™ is a new product offering from Alcatel-Lucent that will dramatically reduce operating costs, technical complexity and power consumption in mobile broadband networks. Designed to meet the long-term needs of mobile operators seeking to ensure their networks can handle increasing traffic loads, lightRadio radically shrinks and simplifies today’s base stations.

The lightRadio portfolio is designed to increase network capacity while simultaneously reducing the cost of delivery, on a per bit basis. The overarching goal is to give operators more options and a flexible path forward for the next decade.  By increasing the capacity at a reduced cost the operators can pursue a whole new market segment, the mass market. In addition, being able to use the lightRadio cube technology in various forms means Small Cells can leverage the technology and rural villages can get wireless coverage at lower costshelping to cross the digital divide.

lightRadio promises greener, simpler, lighter networks, and the benefits are substantial, including:

  • 50% reduction in total cost-per-bit as compared to 3G when adding a comparable amount of capacity
  • 50% reduction in energy consumption when compared to conventional ground based solutions
  • Small and easily deployable – can be deployed anywhere there is a power source and broadband connection and deals with less zoning restrictions
  • Nearly invisible – the WB-AAA is two products in one. It’s adding another radio in the same size form factor with no additional lease cost or further pollution of the urban skyline.

The Alcatel-Lucent “lightRadio” product family is composed of the Wideband Active Array Antenna, the Multiband Remote Radio Head, the “lightRadio” Baseband Processing, the “lightRadio” Control, and the 5620 SAM common management.  The Wideband Active Array Antenna will be trialed later this year and have broad product availability in 2012. For more information on the lightRadio portfolio please click here.

Bell Labs lightRadio™ Breakthroughs [Feb 7, 2011]

The world of mobile communications moves fast. With new mobile devices, new applications and ever-growing and changing consumer demands the wireless networks in use today have to evolve. Rather than take an incremental approach to meet these challenges, Bell Labs took a leap and developed a radically new approach to wireless technology. In order to do this, Tod Sizer, head of Bell Labs Wireless Research, challenged his team to think not just “outside the box,” but to think “inside the cube.” In six short months, the team developed a cube-shaped antenna that would fit in the palm of a hand – and was ready to test it with customers.

Tod Sizer, Head of Wireless Research for Alcatel-Lucent Bell Labs, talks about developing the lightRadio antenna module. lightRadio represents a new architecture where the base station, typically located at the base of each cell site tower, is broken into its components elements and then distributed into both the antenna and throughout a cloud-like network. Additionally today’s clutter of antennas serving 2G, 3G, and LTE systems are combined and shrunk into a single powerful, Bell Labs-pioneered multi frequency, multi standard Wideband Active Array Antenna that can be mounted on poles, sides of buildings or anywhere else there is power and a broadband connection.

“There are many different types and sizes of base stations, from very small to very large, depending on where they are located, such as in an urban or rural area,” explained Sizer. “I realized that we needed to design a new and flexible type of antenna array for different environments– including one designed to the smallest possible size – ‘invisible antennas’ – in order to be flexible enough to meet the growing needs of all of our wireless service provider customers.”

A radio antenna element is a component of an antenna system that transmits signals from the wireless base station to a wireless end-user using a mobile phone, smart device or laptop. By reducing the size of the element itself, an antenna array can be scaled to fit any wireless need simply by adding more of these elements to the array.

Bell Labs wireless researchers weren’t daunted by the challenge of building something that was roughly ten percent of its current size. Several wireless research teams in Stuttgart and Ireland focused on different aspects of the problem, combining their unique areas of expertise to quickly resolve a myriad of technical challenges to reduce the antenna element’s size, improve energy efficiency and lower manufacturing expenses. The clever architecture of this new antenna is but one of the innovations critical to realizing Alcatel-Lucent’s unique lightRadio portfolio.

“We believe this unique antenna – as part of the lightRadio solution – will have a significant impact in the wireless space,” concluded Sizer.

Quick Links

Wim Sweldens presents lightRadio, a breakthrough for the mobile industry [Feb 7, 2011]

Wim Sweldens, President, Alcatel-Lucent wireless activities, talks about lightRadio™, a new system that signals the end of the mobile industry’s reliance on masts and base stations around the world.
lightRadio represents a new architecture where the base station, typically located at the base of each cell site tower, is broken into its components elements and then distributed into both the antenna and throughout a cloud-like network. Additionally today’s clutter of antennas serving 2G, 3G, and LTE systems are combined and shrunk into a single powerful, Bell Labs-pioneered multi frequency, multi standard Wideband Active Array Antenna that can be mounted on poles, sides of buildings or anywhere else there is power and a broadband connection.
More info: http://www.alcatel-lucent.com/lightradio

Alcatel-Lucent. Cube light Radio [Feb 18, 2011]

Highlights of lightRadio press conference [London, Feb. 7th, 2011]

Presentation of the lightRadio system which will dramatically reduce technical complexity and contain power consumption and other operating costs in the face of sharp traffic growth. This is accomplished by taking today’s base stations and massive cell site towers, typically the most expensive, power hungry, and difficult to maintain elements in the network, and radically shrinking and simplifying them. Conference guests: Stephen Carter, Wim Sweldens, Tod Sizer and Javier Garcia Gomez (Alcatel-Lucent), Lisa Su (Freescale) and Joe Weinman (HP).

SOEs and state coexistence in China

– History (pre 2008)
– Recent information from the government (2007-2011)
– Current situation: mostly related to the China Mobile

Major update‘Princelings’ take up key posts in China’s telcos [Feb 24, 2012]

Sons of PM Wen and party propaganda chief promoted to senior positions


(HONG KONG) China’s ‘princelings’, the offspring of top Communist Party leaders, are taking up important positions at the nation’s state-owned telecommunications firms, reflecting their growing political clout as the party prepares for key leadership changes later this year.

Li Huidi, the son of Li Changchun – who is the propaganda chief of the Communist Party and the fifth ranked member of the Politburo Standing Committee – and Winston Wen Yunsong, the son of Premier Wen Jiabao, are among those that have taken up senior positions in telecoms companies recently.

The State-owned Assets Supervision and Administration Commission, which oversees all state-owned enterprises, announced on Tuesday the appointment of Li Huidi as a deputy general manager of China Mobile Communications Corp. Prior to the latest appointment, Mr Li was serving as the company’s vice-president overseeing its TD-SCDMA business.

Mr Li, 44, joined China Mobile in July 2008 as general manager’s assistant to help the company develop the homegrown TD-SCDMA 3G network business, as well as handset sales.

Before joining China Mobile, Mr Li worked at Lenovo Group Ltd and UTStarcom Inc.

Mr Li’s promotion has been much faster compared to other senior officials at China Mobile, an industry veteran told EJ Insight on Wednesday.

He noted that normally a deputy general manager needs to have management experience at both the company’s headquarters and at its regional subsidiaries to secure a chance for promotion.

‘Li’s quick promotion for sure is due to the influence of his father,’ the source said. ‘He did not have any actual experience in telecom operators prior to joining China Mobile.’

Following Mr Li’s latest promotion, there is speculation that he could be a candidate to assume the chairmanship of the world’s largest mobile operator in about three years from now.

China Mobile’s current chairman Wang Jianzhou, 62, is expected to retire shortly due to his age.

Xi Gouhua, 59, currently the vice-chairman, is expected to take the chairman’s post for three years. When he retires, Mr Li could get the opportunity to run for the top post.

However, he would need to compete with other senior China Mobile managers, such as general manager Li Yue, who is 52.

Meanwhile, Premier Wen’s son Winston Wen has been appointed as the chairman of China Satellite Communications Corp on Feb 17. Mr Wen replaced Lei Fanpei, an aeronautical engineer, following a company board meeting.

China Satellite Communications Corp is one of the six state-owned telecommunications infrastructure operators in China, focusing on satellite communications and satellite manufacturing. China Satellite Communications is the parent of Hong Kong-listed APT Satellite Holdings Ltd.

Mr Wen is well known in the market as he was founder of Unihub Global Network, a systems-integration company that served large corporations in China before being merged with PCCW Ltd. He later became a partner at private equity firm New Horizon Capital\. \– EJ Insight

Update: Top China Technology Picks By The World’s Largest Fund Managers [Seeking Alpha, Jan 31, 2012]

Major update: China’s ‘black collar class’ unmasked: The ten most powerful business chiefs who are poised to take over the world [Daily Mail, Jan 29, 2012]

They’re known as the ‘black collar class’.

They dress in dark suits, drive black limousines and have rumoured links to ‘black societies’ from the underworld.

Until now these shadowy mandarins leading the charge of China’s thundering economy have remained hidden.

But after a groundbreaking report, the ten most powerful bosses behind China’s terrifying brand of state capitalism have been unmasked.

A Chinese soldier stands guard outside Tiananmen Gate in Beijing as the red flag flies
cars head into the heaving city that his led the transformation of the country's economy
 A country of two sides: A Chinese soldier stands guard outside Tiananmen Gate in Beijing as the red flag flies. Right, cars head into the heaving city that his led the transformation of the country’s economy

They include business dynasties that have ruled firms for decades, according to reports from the Brookings Institution, specialist Chinese publications and the Sunday Times.

These ‘red dragons’ are now set to become as powerful as the Chinese military, provincial leaders and government ministers.

Between them they control the majority of the Chinese economy, where corruption and vested interests are hidden behind a cloak of secrecy.

And with the rest of the world teetering on bankruptcy, these unstoppable bosses are poised to take take over a string of Western companies.

It’s a thundering assault on the rest of the world from a country that controls virtually every aspect of its citizens lives.

These are the ten most powerful members of the ‘black collar’ elite driving China’s alarming expansion.

Zhang Qingwei

Control of the skies: Zhang Qingwei Control of the skies: Zhang Qingwei

Qingwei was the former boss of the Commercial Aircraft Corporation of China (Comac).

Under his leadership the company has fought to wrestle back control of the Chinese skies from Boeing and Airbus.

The communist state has little time for dependance on foreign companies, and has battled to create a fleet of planes that will compete for passengers.

In a sign of his influence and power, Qingwei has been singled out as the state entrepreneur most likely to win political office. He has begun that march up the communist party, with an appointment as a provincial governor.

Wang Jianzhou

Phone boss: Wang Jianzhou Phone boss: Wang Jianzhou

Anybody who has used a mobile phone in China will have used Jianzhou’s company – China Mobile. The mobile phone network is the largest and most powerful in the world, with an estimated 650million subscribers.

In its aggressive spread across the globe, China mobile has even provided reception for one of the hardest places on earth to reach – Mount Everest. The firm has 230,000 employees and is listed on the New York Stock Exchange and Hong Kong Stock Exchange.

Despite the staggering wealth and power of China Mobile, it has received repeated criticism over its charges. Critics have claimed that half of its profits came from cynical fees for services that are free in many countries, where market competition and democratic government would have banned them.

Li Xiaolin

Electric lady: Li Xiaolin Electric lady: Li Xiaolin

With her delicate features, short hair and red lipstick, Li Xiaolin could be any other Chinese housewife.

But Xiaolin is in fact one of the most powerful women in China.

Xiaolin comes from the Li Family, a dynasty that ‘controls all electric power interests’, according to U.S. diplomatic cables.

Her hardline father Li Peng has stepped down as boss of China Power International Development, but the company is run by Xiaolin and her brother Xiaopeng, a vice governor of Shanxi province.

The pair ‘exercise tremendous power and influence in China’s electric power industry’. Both are tipper to rise prominently within the regime.

Zhou Yongkang

Security chief: Zhou Yongkang Security chief: Zhou Yongkang

As security minister for the Politburo, Yongkang is tasked with the protection of the state – a broad job that few westerners actually know what it involves.

Yongkang may be coming to the end of his term in office, but his power and influence still stretches far and wide.

Yongkang was boss of the China National Petroleum Corporation, and is understood to have made 14 visits to Sudan in trips that are likely to have been centred around oil production.

According to a diplomatic cable released by Wikileaks, ‘Yongkang and his associates controlled the oil interests’ of China.

The turbo-charged expansion of China’s economy has rested on a cheap supply of oil, and that’s largely down to Yongkan’s oil deals.

Su Shulin

Chemical: Su Shulin Chemical: Su Shulin

One of China’s youngest mandarins, Shulin began his rise to power as boss of Sinopec (China Petroleum & Chemical Corporation Limited ), the top-ranking company in the Fortune Global 500.

The chemicals firm is a subsidiary of the state-owned Sinopec Group.

Within China its path to power has been smoothed by the communist party.

But in the rest of the world Sinopec has been heavily criticised for an appalling record of environmental damage. Primatology professor Christophe Boesch criticised Sinopec’s use of dynamite in Gabon in 2004, noting that it might drive native Gorillas deeper into the jungle, where they would be outside legal restrictions on hunting.

Shulin has since left Sinopec and is regarded affectionately by state media.

He has recently been given a role as a provincial governor and is thought of as being among the ‘sixth generation’ of national leaders.

Chen Yuan

Son of suppression: Chen Yuan Son of suppression: Chen Yuan

A banker who is still regarded as a young newcomer, largely due to the powerful shadow cast by his father.

Yuan is the son of Chen Yuan, one of the powerful figures who urged the brutal suppression of protests in Tiananmen Square in 1989.

The treatment of students at the protests sparked a global outcry, as still leaves a stain a on China’s appalling human rights record.

Residents were protesting at economic reforms being implemented to transform China into a ‘socialist market economy’, the catalyst for the country’s rise to economic power.

In a sign of just how removed from Western values China is, Yuan Senior was lauded within the country for his role in the brutal treatment of citizens.

Worryingly, his son is set to regain influence when vice-president Xi Jinping succeeds Hu Jintao as the nation’s leader.

Xiao Gang

Banking boss: Xiao Gang Banking boss: Xiao Gang

Gang is one of the young generation of officials making their rise to power through China’s institutions.

He is currently chairman of the board of directors of Bank of China Limited and Bank of China (Hong Kong) Limited. Gang is even more powerful than the bank’s president – a sign of his ambition and power.

Gang also has control over a limited number of foreign investments in the bank. Coming from the People’s Bank of China, his business philosophy is centered on the strength of the state and he is unlikely to lead open the country up to foreign competition and scrutiny as some critics would like.

Gang’s rise to prominence at such a young age suggests that he is destined for one of the coveted positions within the system.

Guo Shuqing

Oxford educated: Guo Shuqing Oxford educated: Guo Shuqing

One of the few Chinese mandarins to have received an education in England.

Shuqing went from a hardline Marxism-Lenninism faculty to Oxford University.

Upon returning to China, he began his career at the central bank, became a governor of a province and was then given a prominent position at the State Administration of Foreign Exchange.

In a career that mirrors those of many other Chinese star mandarins, Shuqing was eventually given a position in a commercial lender, where he was sure to keep state influence over foreign investors.

Shuqing is currently China’s top security regulator, though few people outside of the small elite know what the intimidating role involves.

Zhu Yanfeng

Driving force: Zhu Yanfeng  Driving force: Zhu Yanfeng

Yanfeng ensured his popularity among ordinary Chinese people by saying that every family should own a car.

But that’s not a surprising statement to come from someone who led one of China’s older carmakers, First Automobile Works, as Yanfeng did.

The grandson of renowned meteorologist Chu Coching, Yanfeng began his career in engineering.

He is the current president of China FAW Group Corporation, and in a sign that he is being primed for a top job within the regime, has been made a provincial vice-governor.

The Chinese economic expansion has been fueled by better transport, and a large part of that is down to Yanfen’s drive for profits.

Zhang Guoqing

Arms trade: Zhang Guoqing Arms trade: Zhang Guoqing

Guoqing is one of China’s ‘masters of war’.

He has spent his career at the country’s largest arms maker, China North Industries Corporation (Norinco), and attended Harvard Business School.

He is now one of the most powerful figures within China’s military-industrial complex, supplying arms around the world.

Norinco has ran into controversy with the west. Its ammunition was blocked during the Clinton Administration in 1993 after concerns about their use by criminals in inner cities. Employees were put under investigation in 1994 by the CIA.

In August 2003, the Bush Administration imposed sanctions on Norinco for allegedly selling missile-related goods to Iran.

There have also been controversies around a transport system to Pakistan and links with arms sales to Colonel Gaddafi in Libya.

Major update: An Evening With the Chinese Intelligence Service [John Thomas, ‘The Mad Hedge Fund Trader’, Sept 28, 2010]

[“John Thomas, The Mad Hedge Fund Trader is one of today’s most successful Hedge Fund Managers and a 40 year veteran of the financial markets.”]

An Evening With the Chinese Intelligence Service. I normally avoid the diplomatic circuit, as the few non committal comments and soggy appetizers I get aren’t worth the investment of time. But I jumped at the chance to celebrate the 61st anniversary of the founding of the People’s Republic of China with San Francisco consul general Gao Zhansheng.

Happy Birthday China!

When I casually mention that I survived the Cultural Revolution and interviewed major political figures like premier Deng Xiaoping, who launched the Middle Kingdom into the modern era, and his predecessor, Zhou Enlai, modern day Chinese are enthralled. It’s like going to a Fourth of July party and letting drop that I palled around with Thomas Jefferson and Benjamin Franklin.

Five minutes into the great hall, and I ran into my old friend Wen, who started out her career with the Chinese Intelligence Service, and had made the jump to the Foreign Ministry, as all their best people did. She was passing through town with a visiting trade mission.

When I was touring China in the seventies as the guest of the Bank of China, Wen was assigned as my guide and translator, and we kept in touch over the years. I was assigned a bodyguard who doubled as the driver of a tank like Russian sedan. The Cultural Revolution was on, and while the major cities were safe, we ran the risk of running into a renegade band of xenophobic Red Guards, with potentially fatal consequences.

I asked Wen when China was going to float the Yuan? She explained that this is something China knew it had to do, but it wasn’t going to be rushed into by some opportunistic foreign politicians. If it moves too soon, millions will lose jobs, creating political instability, something the central government wants to avoid at all costs. Many of the largest scale employers were only marginally profitable, and a hike in the renminbi of only a few percent would force them out of business. I pointed out that that was exactly what was happening in the US.

Worth More Than Meets the Eye

I warned that if the Middle Kingdom waited too long, Washington would force them into an appreciation through punitive import duties and anti dumping actions, as we did with Japan 40 years ago. It was Nixon’s surprise ban on textile imports in 1971 that finally persuaded Japan to float the yen, then at ¥360. If that didn’t convince the Chinese, then imported inflation would. The longer China delays, the bigger the pop when their currency is finally set free.

Wen then went on the offensive, claiming that Chinese workers were being exploited by American companies keeping wages low. The product that China made for $1, and sold for $2, was then sold by Wal-Mart (WMT) for $20, which kept all the profits. She pointed out that the Walton family had a combined net worth of $100 billion, more than the total worth of the lower 40% of the US population. This could never happen in China. I told her that by selling the product at $20, Wal-Mart wiped out another US company that used to make that product domestically and sold it for $40, throwing those people out of work.

Modern Times in China

I then asked Wen what were her country’s plans for its massive foreign exchange reserves, now at $2.5 trillion? She agreed that this was a problem because the reserves were pouring in so fast, at an embarrassingly high rate of $10 billion a month, and that it was the most rapid accumulation of wealth in history (click here for the data). While it had more than enough Treasury bonds, any attempt to sell might cause their value to collapse and freeze relations with the US. I suggested China should start hedging its gigantic holdings without selling them, or some managers would be facing a firing squad in the future.

China has therefore begun directing new reserve inflows into other instruments, like gold, Japanese government bonds, and PIIGS bonds in Europe. While the Europeans were more than happy to take the money, the Japanese were complaining that China’s modest purchases were driving up the yen, further depressing their own economy. We all know what has happened to gold.

China tried to recycle its surpluses by buying foreign companies that produce the natural resources it desperately needs. But takeover attempts were fought tooth and nail as a foreign invasion, or on national security grounds, such as the attempt to buy California’s Unocal in 2005 and Australia’s Oz Minerals last year. It was now using a strategy of buying low profile minority stakes in foreign resource companies. China took a big stake in the recent Petrobras (PBR) secondary equity offering, and Wen would not be surprised if they took a run at Potash (POT), now that it is on the table”.

Check Out This tasty Little Morsel

I asked her about the real estate bubble in China that was causing so many foreign investors to lose sleep. She said it was true that sales were slow at some luxury buildings in Beijing and Shanghai, but the great majority of developments were aimed at working people, and were filling up as soon as they came on the market. The 40% down payment demanded by the People’s Bank of China headed off the rampant speculation that brought the American financial system down.

Rooms With Views

Wen then complained about the aggressive military stance the US was taking towards China, ringing it in with the Seventh Fleet. Holding a knife so close to the country’s foreign supply line jugular vein made them nervous. China was basically indefensible. All it would take was the sinking of a few grain ships, and 100 million would starve within a year. President Bush was rattling his saber as soon as he moved into office, until 9/11 diverted his attention to Afghanistan and Iraq.

Wen told me there is a school of thought in Beijing that as the country’s economic power grows- it is passing Japan to become second in GDP this year– that the US will increasingly perceive it as a military threat. That would lead America to mete out the same hostile treatment to China as it did Russia during the cold war.

Walking Softly, But Carrying a Big Stick

I assured her that the Seventh Fleet was there to watch and listen, but to do nothing. It was really in position to provide a security blanket for allies, like Japan and South Korea, but nothing more. China wasn’t engaging in the belligerent behavior that Russia was at the height of the cold war, like blockading Berlin, basing missiles in Cuba, stationing fast attack nuclear submarines off our coasts, and invading Afghanistan.

I argued that if China truly has no expansionary intentions, the more we know about you, the better. It is always prudent for a potential adversary to conclude you are not a threat, and that no action is needed. The more you help the US do that, the better. China is decades behind the US in military technology, and you really have nothing we want. Little more than 200 nuclear weapons without an ICMB or submarine delivery systems were hardly viewed as a major threat.

Wen seemed perturbed that I was aware of her country’s nuclear stockpiles, and asked how I knew this. I said CIA director Leon Panetta told me She said “Oh.” I asked what was that test downing of a satellite in space about, anyway? She didn’t answer.

In any case, with our military fully committed fighting two wars in the Middle East, we lacked the resources for an Asian offensive if we were so inclined, even against a piddling, mismanaged, rogue state like North Korea. But looking at the world for the next 30 years, who is the Pentagon going to model and war game against, but China, with its 2.5 million man army?

Wen countered that the People’s Liberation Army was purely a defensive force. With a 12,000 mile land border, an 11,000 mile coastline, and dubious neighbors like Russia, Iran, and India, they have no other choice. Its ability to project force over great distances, as the US can, is virtually nonexistent. Its 1979 invasion of Vietnam was about reclaiming ten miles of lost territory. China got involved in Korea only after general Douglas MacArthur threatened to rain atomic bombs on the mainland, losing 2 million men, including Chairman Mao’s son. China could have done a lot more in the Vietnam War, but didn’t, limiting its participation to a supply, logistical, and advisory role.

That’s a Lot of Border to Defend

I then warned that if you really are worried about the Pentagon, you should stop hacking into our computers. She replied that the US started this by emptying out Chinese mainframes many times, and they were only responding in kind. I said yes, but that China was targeting private companies, like Google (GOOG), Hewlett Packard (HPQ), and Oracle (ORCL), that without military grade software, were unable to defend themselves. The Chinese agencies involved then used the data to their own commercial advantage.

What Did You Say the Password Was Again?

By the time Wen married, China had already adopted its one child policy. As much as she wanted more children, she understood the government’s need to adopt such a drastic policy. Without it, the population today would be 1.6 billion, not 1.2 billion, and all of the money that went into buying capital goods would have been spent on food imports instead. The country would have stagnated at its 1980 per capita income of $100/year. There would have been no Chinese economic miracle. She was very proud of her one son, who was a software engineer at Microsoft (MSFT) in Beijing.

Her husband, a mid level official at the Ministry of Commerce, fared less well, dying of lung cancer at a relatively early age. The US and Europe had exported their worst polluting industries to China to take advantage of lax environmental controls, turning the air in Beijing into a choking haze. Sometimes her son would come home from school coughing and wheezing so badly that he couldn’t play outside. The two packs of cigarettes a day her husband smoked didn’t help either.

Imported From the USA

I asked if she recalled our first trip together and a dark cloud came over her face. We were touring a section of Fuzhou when three policemen marched up. They started shouting at Wen that we were in a restricted section of the city where foreigners were not allowed. They started mercilessly beating her with clubs.

I was about to intercede when my wife, Kyoko, let go with a blood curdling tirade in Japanese that froze them in their tracks. I saw from the fear in their faces that she had ignited their wartime fear of Japanese authority, and they beat a hasty retreat. To this day, I’m not exactly sure what Kyoko said. We took Wen back to our hotel room and bandaged her up, putting ice on the giant goose egg on her head. When I left, I gave her my copy of HG Well’s A Short History of the World, which she treasured, as the book was then banned in China.

Wen mentioned that she was approaching the mandatory retirement age of 60, and soon would be leaving the Foreign Service. I suggested she move to San Francisco, which offered a thriving Chinese community and home prices that had recently dropped by half. She laughed. No matter how much prices had fallen, she could never afford anything here on a Chinese civil servant’s salary.

Wen told me that China was grateful for the billions of dollars that foreigners had poured into her country as a result of my writings. I replied that I was simply trying to show my readers where to make some money, nothing more. One of my recommendations, for Chinese search engine Baidu (BIDU), was up nearly tenfold in less than two years. Did she happen to know about any more future Baidu’s? Wen said that she wasn’t that close to the stock market, but that she would get back to me.

I asked Wen if she still had the book I gave her nearly four decades ago. She said it had become a family heirloom, and was being passed down through the generations. As she smiled, I notice the faint scar on her eyebrow from that unpleasantness so long ago.

In view of Wen’s comments, I think you have got to buy the Chinese ETF here (FXI), which is the principle lagging emerging stock market this year. You also better revisit my stock picks in the area, including Baidu, China Mobile (CHL), Build Your Dreams (BYDDF), and China Telecom (CHA).

By. Mad Hedge Fund Trader

Update: Ex-China Mobile official gets suspended death sentence [July 23, 2011]

A court in North China’s Hebei province on Friday sentenced Zhang Chunjiang, former deputy general manager of China Mobile, to death with a two-year reprieve, after he was found of taking bribes.

The Intermediate People’s Court of Cangzhou also ordered the confiscation of Zhang’s personal assets and stripped him of his political rights.

The court found that Zhang, 53, took 7.46 million yuan ($1.15 million) in bribes between 1994 and 2009 when he was deputy director of the Liaoning provincial postal administration, general manager of China Netcom Group Corporation Ltd, and Party chief as well as deputy general manager of China Mobile.

Zhang, a native of East China’s Shandong province, was given a suspended death sentence, meaning the sentence could be commuted to life imprisonment after two years of good behavior, because he confessed his crimes and all the bribe money had been recovered, according to the court.

He had previously been removed from his post and expelled from the Communist Party of China (CPC) for “severe violations of the discipline and the law.”

Zhang was confirmed to be under investigation for a “serious breach of discipline” on Dec 26, 2009, by the CPC Central Commission for Discipline Inspection, the Party’s internal anti-graft body.

He became secretary of the Party committee and deputy head of China Mobile in May 2008.

China Mobile is the country’s biggest wireless service provider and the world’s largest mobile carrier by number of subscribers.

Zhang was among a dozen ministerial-level officials, including former Shenzhen mayor Xu Zongheng, punished as China intensified its fight against corruption.

The Supreme People’s Court has vowed to continue to battle corruption by meting out harsh punishments to those who are convicted.

Sun Jungong, spokesman of the Supreme People’s Court, warned on Tuesday that for crimes involving an abuse of public office – especially cases of corruption and bribery – that are severe enough to merit the death penalty, the court will not go lightly but will instead approve executions.

Xu Maiyong, former vice-mayor of Hangzhou, and Jiang Renjie, former vice-mayor of Suzhou, were executed on Tuesday for taking large amounts in bribes and abusing their power.

Statistics compiled by the Supreme People’s Court show that 28,708 officials were convicted of abuse of power in 2010. Of them, 5,906 were sentenced to more than 5 years in jail.

I. History (pre 2008)

China’s state-owned enterprise reforms: an industrial and CEO approach (2007, By Juan Antonio Fernández, Leila Fernández-Stembridge)
Introduction (emphasis is mine)

As known by all, China is a vastly populated country that is currently undergoing one of the most particular and crucial transformations in the world’s economic history of these last 25 years. On a general level, China has been transforming itself from a command to a (bound-to-be) market economy, from an economy based on agriculture to one based on manufacturing and services, from one with high fertility and low longevity to one with low fertility and high longevity, and from a closed economy to a fairly open economy, ever more since World Trade Organization (WTO) accession in December 2001.

The literature on the significance and meaning of China’s economic reforms is quite abundant, for which we will not repeat what has been already been extensively explained. We prefer rather to focus on the SOEs reforms. It is important to stress within this context, however, a glimpse of the burden of the scale China implies. Here are just a few of the most important indicators:

  1. By the late 1990s, among China’s SOEs, there were 500 that employed more than 100,000 people – forty times the number of companies of similar size in the United States;
  2. Every year, China’s economy must create 10 million to 15 million new jobs so as to avoid an excessive unemployment rate;
  3. China has more cities of 1 million-plus population than the rest of the world combined;
  4. The floating population of peasants moving to the cities to find a job oscillates at approximately 100 million, which is 10 million short of Russia’s entire population;
  5. There is an emerging urban middle-class in China that accounts for an annual growth of more than 8% and represents a source of rampant consumption;
  6. The urban population will reach about 50% of total population by 2020, while in 2000 it was little less than 40%;
  7. China has more than 40 million retirees: by 2025 there will be as many people aged 60 or more than the rest of the world combined; etc.

The reforms launched in the late 1970s combined a general economic transformation between finance, taxation, pricing, foreign trade, foreign direct investment and, of course, SOEs reforms. After all, as an intrinsic part of the gradual draining of the economy, China’s SOEs have undergone crucial restructuring, particularly since 1993 in Shanghai and since 1997 at the national level, with a crucial turning point since the creation in March 2003 of the State-owned Assets Supervision and Administration Commission (SASAC) of the State Council.

Indeed, after the Party’s 15th Congress in September 1997, a modern enterprise system broadened and accelerated – endorsed already during the 8th National People’s Congress in March 1993 – and pushed further for the incremental and experimental process of SOEs reforms through a new corporate governance system functioning through the motto of “grasping the big (SOEs), letting go the small (SOEs)” (zhuada, fangxiao), whereby over 10,000 large and medium SOEs would be kept under the Central Governments’s control while converted into shareholding companies; and more than 100,000 small SOEs would be privatized or merged with non-state enterprises, forming joint ventures with foreign firms, or otherwise leasing assets to their workers.

Despite the progress made at the administrative level (e.g. increasing managerial autonomy), the separation between government and enterprise remained incomplete: SOEs continued to be under the pressure of guaranteeing social services (housing, education, medical coverage) to some of their workers – including laid-off workers (xiagang zhigong) and redundant workers (fuyu renyuan) – and their productive functions were persistently weakened in detriment of higher output and productivity levels. Meanwhile, unemployment rates were threatening to increase beyond expectations – although always below 5%, according to official statistics but at approximately 15%, according to independent statistics. Then, SASAC got on stage in March 2003 after the First Session of the 10th National People’s Congress. SASAC can be briefly defined as a shareholder on behalf of the State made responsible for the supervision and management of state-owned assets, the appointment and removal of top CEOs in SOEs, with assets worth 6.9 trillion RMB (US$834 billion). [February, 2011: 121 centrally administered state-owned enterprises with their total assets worth nearly 24 trillion yuan (3.65 trillion U.S. dollars)] In theory, SASAC’s aim is to separate government administration and ownership from day-to-day enterprise management, while the guiding principle is that the state sector should withdraw from all competitive economic sectors and leave room for the development of the private sector.

During the initial stage of SOEs reforms (1978-1983), SOEs managers were given more autonomy and were allowed for the first time to retain a share of their profits. In addition, the baby-boom children of the 1950s and 1960s were entering the labor market and urban dwellers that had been sent to the countryside were returning from there, which altogether increased the pressures on job creation. In order to avoid higher levels of unemployment, or further overstaffing, local governments promoted employment out of the state-owned sector, encouraging the development of small businesses (getihu). Unfortunately, price distrotions persisted, for which levels of efficiency and resource allocation remained insufficient.

While the economy was being pushed to further marketization, a second wave of SOEs reforms was launched between 1984 and 1988, allowing SOEs to respond to market forces with an increasing autonomy in establishing wages according to their levels of productivity. In addition, SOEs were were given more freedom to hire and fire workers, following their production needs. The so-called contract responsibility system (CRS), which had emerged bí 1983 appeared as an incentive for enterprises to maximize their financial surplus, was replaced … by the tax-for-profit system (li gai shui reform) until 1986, where profits were reclassified as taxes, and enterprises emerged as residual claimants on after-tax profits. As this system proved to be inefficient, a more developed CRS re-emerged, lasting only until January 1994, when fiscal reforms took place (enterprise tax payments were re-centralized), and the CRS was replaced by an income tax.

With the dramatic surge of Township and Village Enterprises (TVEs), inter-enterprise competition emerged. Between 1984 and 1988, the number of TVEs increased from almost 6.1 million to almost 18.9 million, and the number of employees rapidly rose from almost 52.1 million to 95.5 million, whereas during the same period SOEs slowly employed from 86.4 million to 99.9 million. Although job creation does not represent a direct measurement of outtput value (after all, gross output value of industry of SOEs was almost three times higher than  the TVEs gross output value within that same period), labor costs were lower in TVEs than in SOEs, as TVEs only performed productive functions, whereas SOEs were in addition burdened with providing social services (fuli) to their workers. The competition caused by the growth of TVEs progressively changed the conditions of the SOEs reforms, narrowing the monopoly profits of SOEs.

By 1989, SOEs had progressively lost their leading position in the national economy: in the late 1970s, they contributed nearly 80 per cent to industrial production, whereas, by the end of the 1980s, their contribution had declined to little more than 55 per cent. In addition, the dual-track price system created a misleading trend of market-determined prices and incentives for corruption. The launching of an austerity program after the 1988 high inflation rate, as measured by the consumer price index (18.8 per cent), provoked a systematic risk of social unrest, for which SOEs were pressured by the Chinese government to increase their labor demand during this third wave of reforms (1989-1992) – despite their lower capacity of production – and to continue to provide, as in the past, an “iron rice bowl” to their employees. As a result, underemployement re-emrged, profits dcreased, and the demand for loans and credits increased. SOEs were again unprofitable.

By mid-1993, the situation changed, and a fourth wave of reforms was launched: job reallocation of laid-off workers had to be done through the so-called Re-Employement Project (zaijiuye gongcheng, REP), where the government not only ordered all enterprises to use the same accounting system, but in opposition to the past, it imposed a relatively hard budget constraint aimed to stop the SOEs’ indiscriminate access to bank loans, and therefore avoid the collapse of the banking system. The breakdown of the “iron ricfe bowl” system was equally suggested: as an increase of unemployment was foreseen, an institutional watchdog had to be prepared. That is why the Ministry of Labor launched the REP, instigating local governments to promote the development of training programs through the creation of re-employment service centers (zaijiuwe fuwu zhongxin) through which unemployed redundant workers could be matched with other enterprises, or otherwise encouraging them to be self-employed. By 1996 the REP proved to be effective and operational in 200 cities. As a result, the Ministry decided to re-launch new re-employment training programs for at least 4 million laid-off workers and 6 million unemployed from 2001 to 2003, as part of the Tenth Five-Year Plan.

The current wave of SOEs reforms (since 2003) is much determined by SASAC’s role in centralizing state-owned assets and pushing at least in theory for a more effective capital management system. While the private sector is rapidly growing, the remaining strong SOEs (mostly large ones, withinn an approximate total of 200) have to further transform their corporate governance system, their productivity levels and eventually their over-dependence on the banks’ generous non-performing loans.

II. Recent information from the government (2007-2011)

Central SOEs net profits up 14.2% for first five months [June 7, 2011] (emphasis is mine)

China’s state-owned enterprises (SOEs) that are administered by the central government, or central SOEs, collectively posted a net profit increase of 14.2 percent year-on-year in the first five months of 2011.

This increase was 4 percentage points lower than that of the first four months.

The combined net profits of the government’s 121 central SOEstotaled 369.51 billion yuan (56.8 billion U.S. dollars) during the period, the State-owned Assets Supervision and Administration Commission (SASAC) said in a statement on its website Friday.

The administration did not give any explanation for the profit increase or the lower growth rate.

The SASAC said revenues for central SOEs rose 24.7 percent year-on-year to hit 7.82 trillion yuan from January to May.

The SOEs had 696.7 billion yuan payable in taxes and fees for the first five months, up 27.5 percent from the same period last year, according to the statement.

Chinese SOEs ordered to hand over more profits next year [Dec 30, 2010] (emphasis is mine)

The centrally-administeredstate-owned enterprises (SOEs) were ordered to hand over 5 percent more of their after-tax profits to the central government beginning 2011, according to a statement by the Ministry of Finance (MOF) on Thursday.

According to the MOF statement on its website, 15 centrally-administered SOE giants in the resources and telecommunication sectors, including CNPC, Sinopec, CNOOC, State Grid Corporation, China Tobacco, Shenhua Group Co., Ltd. and China Mobile, should turn in to the MOF 15 percent of their after-tax profits next year, up from their current 10 percent requirement.

Also, beginning next year, 88 centrally-administered SOEs, including CHALCO, CNMC, COSCO, Air China, China Southern Airlines and China Merchants Group, will have to transfer 10 percent of their after-tax profits to the MOF, up from 5 percent this year.

Meanwhile, 33 other SOEs, including China National Nuclear Corp., China South Industries Group and China Film, will begin delivering 5 percent of their after-tax profits to the MOF in 2011. Currently, they don’t have to turn in any of their profits.

Two other SOEs — China Grain Reserve Corp. and China National Cotton Reserve Corp.– can still keep their profits for their own development next year, according to the MOF. The MOF administers China’s macroeconomic policies and the national annual budget, handles fiscal policy, economic regulations and government expenditure for local governments.

Chinese centrally-administered SOEs’ profits are expected to hit 1 trillion yuan (about 151 billion U.S. dollars) in 2010, according to the State-owned Assets Supervision and Administration Commission (SASAC).

Another 652 SOEs, mainly affiliated with the Ministry of Education, will be included in the budget system of managing state capital, which requires their expenditure be examined by national and local legislatures.

China’s central SOEs set to get smaller in size, stronger in competence
MONOPOLY OR NOT [Dec 21, 2007] (emphasis is mine)

Contributions from such central SOEs now accounted for 20 to 25 percent of China’s national fiscal revenue.

Along with jumbo revenue, which should have benefited common people, many constantly complained some SOEs were in such a monopoly position that they ate into consumer benefits.

For instance, expensive fees for making phone calls were brought up at meetings for the national congress every year. “Why should Chinese citizens be charged higher fees for making phones calls than in developed countries?” many queried.

The SASAC asked 116 pilot SOEs to turn in part of their revenue in 2006 to the government, a figure which was expected to hit 14 billion yuan. All central SOEs would hand in part of their revenue starting in 2007.

Eighteen enterprises that relied heavily on resources were required to hand in 10 percent of their revenue. Ninety nine others with a five-percent quota and two enterprises responsible for cotton and crop reserve were exempted from such obligations.

SASAC’s Li Rongrong said the revenue would be used to finance reforms of SOEs, especially to support the arrangement of laid-off workers. It could be injected into the social security fund, if possible.

The news also prompted the Chinese public to anticipate that the revenue could be included into the public budget to give more support to needy sectors such as education and medical care.

Li also said the top annual salary for managerial staff of central SOEs was 1.18 million yuan. In addition, the SASAC would publish salaries of senior SOE staff in future to introduce more transparency amid mounting speculation due to secrecy of such wages.

Central SOEs to return part of profits to exchequer next year [Sept 17, 2007] (emphasis is mine)

Central state-owned enterprises (SOEs) will begin to return some of their annual profits to the Ministry of Finance next year, according to a document released by the State Council, China’s cabinet, on Thursday.

The process will begin on a trial basis for some SOEs this year.

Since 1994, central SOEs have retained all their profits in their own coffers.

The document on State Council’s proposals on budgeting of state assets operation on a trial basis said finance authorities at all levels were responsible for budgeting. Part of the budgeted expenditure from state assets would be used for social security purposes.

It says returns on state capital include profits to be returned to the state by wholly-state-owned enterprises, dividends of enterprises with state holdings and proceeds from transfers of state-owned property rights and of state equities.

Budgeted expenditure from state assets would be mainly used for central SOE operation, development and restructuring, and be used to pay for cost of state-owned enterprises reform.

According to the National Bureau of Statistics, from 2003 to 2006, central SOEs saw their profits increase by 151.1 percent from 300.6 billion yuan (40 billion U.S. dollars) to 754.7 billion yuan.

There are 168 central enterprises under the supervision of the State-owned Assets Supervision and Administration Commission.

China orders major state-owned firms to report large investments [Aug 2, 2007] (emphasis is mine)

China’s state assets watchdog on Wednesday ordered all central state-owned enterprises (SOEs) to report their major investment activitiesin a bid to shun investment risks.

Some SOEs continue to increase their investment despite their high asset liability ratio and some even embezzle bank loans to invest in stocks and real estate, the State-owned Assets Supervision and Administration Commission(SASAC) said.

The China Banking Regulatory Commission announced on June 18 that two SOEs, the China Nuclear Engineering and Construction (Group) Corporation and the China Shipping (Group) Company, have misappropriated 4.46 billion yuan in bank loans to invest in the equity market and real estate projects.

The SASAC stated that the 155 central SOEs under its supervision should timely report their major overseas investment and investments in real estate, stocks, and insurance.

Senior officials of the major SOEs will be punished or even face criminal charges if they fail to report their major investments or cause heavy losses, the watchdog said, urging the firms to enhance their investment risk management and control.

China solves 76 commercial bribery cases in SOEs [July 12, 2007] (emphasis is mine)

China has solved 76 commercial bribery cases related to large state-owned enterprises (SOEs) in an intensive inspection campaign, with about 18 million yuan (2.4 million U.S. dollars) involved, according to the country’s state-owned assets watchdog.

Sixty-six people have been given criminal punishments and 28 administrative penalties, said the State-owned Assets Supervision and Administration Commission of the State Council.

The cases came to light after the commission ordered large state-owned enterprises to carry out self-inspection of commercial bribery between April and December last year.

Commercial bribery usually refers to bribes offered by companies to government officials or state-owned enterprises in exchange for special favors.

The campaign mainly targeted property right transfer, construction projects and material and equipment procurement, the commission said.

Property right transfer has been a major target in the fight against commercial bribery among state-owned enterprises in China.

“The self-inspection campaign reviewed all the 1,198 property transfers from the beginning of 2005 till the end of last year,” said an official with the commission.

Last year, the commission and the Ministry of Financejointly issued a notice to further regulate the approval of state-owned property right transfer and bottom prices.

In addition, regional state-owned assets watchdogs have sanctioned 65 property right trading centers in a bid to regulate property right transactions.

A monitoring system linking these trading centers with state-owned assets watchdogs in Beijing, Shanghai and Tianjin has been established to enable the watchdogs monitor all the transactions and unified release of property right transfer information in the future.

China’s SOE supervisor vows to boost transparency after violations aired in audit [May 22, 2011] (emphasis is mine)

China’s state-owned enterprises (SOEs) supervisor on Saturday said it would work to make the SOEs management more transparent after China’s top auditor publicized irregularities among a number of famed SOEs.

The release of the audit results will help the public to monitor the SOEs and help the SOEs to redress loopholes, said the State-owned Assets Supervision and Administration Commission of the State Council in a statement on its website.

The supervisor said the SOEs have made progresses in management, risk controls and social responsibilities in the past years, but they still lag far behind top-level international enterprises and should take advantage of the disclosures to enact further changes, the statement said.

Heads of the enterprises will be asked to take the lead in saving, fighting against squandering, controlling “irrational spending” and reducing management costs so that limited funds and resources can be invested in enterprise development, the statement said.

The National Audit Office (NAO) on Friday publicized some irregularities and disciplinary violations in the financial statements of 17 SOEs for the 2009 fiscal year.

By March this year, 735 cases of irregularities have been corrected and 65 people responsible for the irregularities or violations have been punished, according to the office.

Last year, the NAO audited the financial statements of 17 centrally-administered SOEs, including CNOOC, CHALCO, COSCO and China Unicom, primarily for the 2009 fiscal year.

China introduces collective decision-making for state companies to curb corruption [July 15, 2010] (emphasis is mine)

China announced Thursday it would introduce a new collective decision-making procedure into its powerful and profitable state-owned enterprises (SOEs) in a bid to strengthen anti-corruption efforts and guard against financial risks to those companies.

All important decisions, appointments of key officials or executives, arrangements of major projects, and the use of large quantities of capital inside the SOEs must now be jointly decided by their collective leadership, said a statement released by the General Office of the Central Committee of the Communist Party of China (CPC) and the General Office of the State Council, or China’s Cabinet.

The statement highlighted China’s increasing pressure to keep executives of its profitable SOEs under the public’s direct supervision.

Thirty-five senior executives of China’s large SOEs, such as former Sinopec chairman Chen Tonghai, faced corruption charges last year and 31 of them were found to be connected to cases involving an average of 110 million yuan (16.2 million U.S. dollars).

With the new procedures, SOEs are expected to improve their decision-making mechanism by modifying the rules of procedures that include public participation, expert consultations and collective decisions concerning major issues, according to the statement.

Development strategies, filing for bankruptcy, restructuring, mergers and acquisitions, transfers of ownership and overseas investment plans by SOEs are all to become subject to such collective decision making practices, said the statement.

The SOEs’ annual investment plans, financing, financial derivatives such as options and futures, imports of key equipment and technologies, bulk purchases and construction of major projects also would now need approval from their collective leadership, according to the new procedures.

Corruption watchdog promises closer supervision of China’s SOEs [Jan 7, 2011] (emphasis is mine)

China’s discipline and government watchdog Thursday pledged to tighten supervision on state-owned enterprises and fight corruption among their executives.

“We will push hard investigations into and punishment of corruption in the restructuring, merger, property transactions, capital operations and construction projects of state-owned enterprises,” said Vice Minister of Supervision Qu Wanxiang at a meeting in Beijing.

The watchdog would focus on cases involving executives and employees in senior positions, said Qu, also a member of the Standing Committee of the Communist Party of China (CPC) Central Commission for Discipline Inspection (CCDI).

Severe measures would be taken to curb commercial bribery and the illegal practice of setting up “small coffers,” referring to funds, securities and assets that should, but frequently are not, listed in account books in a bid to escape supervision.

The inspectors would also target malpractice that harmed common employees’ legal rights and interests in the restructuring of state-owned enterprises, Qu said.

Last year, China saw a string of serious corruption cases in state-owned enterprises.

According to a report Tuesday by Faren Magazine, affiliated to the Legal Daily and overseen by the Ministry of Justice, 35 senior executives of China’s large state-owned enterprises (SOE) faced corruption charges last year.

Among them was Kang Rixin, general manager of the China National Nuclear Corporation(CNNC), who has been under investigation for alleged grave violations of discipline since August.

Another prominent case involved Chen Tonghai, former general manager of China Petrochemical Corporation, who was found to have taken almost 200 million yuan in bribes and given a death sentence with a two-year reprieve in July.

“Efforts should be made to incorporate corruption prevention in enterprise governance and risk control systems,” Qu said.

The government should further reform SOEs to help build sound corporate governance with proper decision-making, operations and supervision, he said.

Over the past three decades, China has been trying to introduce a modern corporate management in its state-owned enterprises, but faced problems with a lack of supervision and restricting the authority of managers.

China to watch out for corruption in SOE stimulus projects [Feb 8, 2009] (emphasis is mine)

China’s state assets watchdog will closely watch over projects implemented by state-owned enterprises(SOEs) in the country’s massive stimulus package to prevent corruption, an official said in BeijingSunday.

The State-owned Assets Supervision and Management Commission (SASAC) will strictly look into the progress and fund use of projects by SOEs directly under the central government, said the SASAC director Li Rongrong.

Many projects are estimated to see over tens of millions of yuan put in, making it a more important task to fend off corruption, he said at an SOE meeting on disciplinary inspection work.

China unveiled a stimulus package with a total investment of 4 trillion yuan (586 billion U.S. dollars) in November to boost domestic demand and offset the world economic slowdown.

Of the total, 100 billion yuan had been allocated by the central government by the end of last year.

Li said inspectors will particularly focus on projects in such sectors as power grids, telecommunications, transportation, equipment, construction and metallurgy.

The SASAC will also check whether the projects cause environmental hazards, consume too much energy and resources or result in excessive capacity, said Li.

A total of 4,960 Chinese officials above the county level were punished in a year ending November 2008, data show. They were involved in corruption and commercial bribes, hurting people’s interests.

China state executive posts attract rising number of applicants [Sept 12, 2008] (emphasis is mine)

More than 2,700 people have applied for 16 executive positionsof the centrally-administered state-owned enterprises (SOEs) open for public competition this year, the State-owned Assets Supervision and Administration Commission (SASAC) said.

The 2,745 applicants more than doubled that of those applying for last year’s 22 posts.

Of this year’s available posts, six received 200 to 300 applicants for each.

SASAC said the positions included three general managers, 10 deputy general managers and three chief accountants from different industries. They covered electricity, metallurgy, electronics, chemical engineering and tradefirms.

China FAW Group Corporation, China Baosteel Group and China Southern Power Grid, all ranked among the world’s top 500 companies, were also recruiting.

SASAC also said 383 applicants, 12 from overseas and four from Hong Kong, Macau and Taiwan, met the qualifications. They have been notified to sit for a written exam to be held soon.

Most qualified applicants have post-graduate degrees and are aged under 45, while 140 currently are heads of enterprises. In addition, 69, or 18 percent, have overseas working or study experience.

In 2003, SASAC started to recruit from both home and abroad. The agency hoped such managers could help improve the competitiveness of SOEs in the global market.

China considers cap on salaries at state monopolies [June 30, 2010] (emphasis is mine)

Chinese authorities are considering putting a ceiling on the total amount of salaries distributed at profitable state-owned monopolies amid government efforts to narrow the widening wage gaps between the rich and poor.

The Ministry of Human Resources and Social Security (MHRSS) said in a report that it would proceed to map out specific measures to “strictly control” the total payments distributed at state-owned monopoly businesses. The report was obtained by Xinhua Tuesday.

The report, which was written after a working group from the Standing Committee of the National People’s Congress (NPC), China’s top legislature, put forward written proposals on the enforcement of the country’s Trade Union Law, did not spell out the upper limit of the payment aggregate.

In China, the monthly salary for an average employee at state-owned monopolies, such as telecommunications and natural resources, could be as high as three times compared to those working in the private sector, most of whom earn about 3,000 yuan (about 440 U.S. dollars) per month.

This widening gap has resulted in some public complaints and driven millions of college graduates to seek jobs at state-owned monopolies, where employees are assured of better healthcare insurance and a more stable income.

To establish a “normal wage growth mechanism”, the ministry said in its report it would continue to address wage gap problems through a procedure to “put a ceiling on high-income, expanding the medium-income class and ensuring minimum wages.”

The ministry would also continue to push for the establishment of a mechanism that grants workers more decision-making power in formulating salary policies and enables their wages to fluctuate in line with the ups and downs of businesses, according to the report.

It said the income of executives, especially those in the senior ranks, in centrally administered state-owned enterprises should be regulatedand authorities should ensure minimum wage standards be altered in a reasonable and timely manner.

The Standing Committee of NPC has assigned a working group to review the enforcement of the country’s Trade Union Law from July to August last year.

Based on investigations and research, the working group sent forward written proposals on the implementation of the Trade Union Law.

The MHRSS, in collaboration with the ministries of commerce and health, the All China Federation of Trade Unions, as well as the Legislative Affairs Office of the State Council, or China’s cabinet, mapped out the report based on these proposals.

The report was then submitted to the State Council and forwarded to the top legislature at the 15th session of the Standing Committee of the 11th NPC, a four-day meeting that ended Friday.

Copies of the report were distributed to members of the NPC Standing Committee during the meeting.

China strives to readjust income distribution to stop yawning gap [March 5, 2011] (emphasis is mine)

Readjusting income distribution in a reasonable manner is both a long-term task and an urgent issue to address at present, Premier Wen Jiabaosaid Saturday in his government work report delivered at the parliamentary annual session.

According to Wen, three major measures will be taken in 2011: increasing the basic incomes of low-income people in both urban and rural areas, putting more effort into adjusting income distribution, and vigorously overhauling and standardizing income distribution.

“We will steadily increase the minimum wage of workers, basic pensions of enterprise retirees, and subsistence allowances for both urban and rural residents,” Wen said, noting that a sound mechanism of regular pay raises for workers and strictly enforce the minimum wage system will be established.

The government will also raise the individual income tax threshold on salaries, reasonably adjust the tax rate structure, and genuinely reduce the tax burden on low- and middle-income people.

“We will effectively regulate excessively high incomes, strengthen the dual controls on total wages and wage scales in industries in which incomes are excessively high, and strictly standardize the management of executive pay and bonuses in SOEs and financial institutions,” the premier said.

Wen added that illicit income will be resolutely prohibited and a system for monitoring income distribution will be quickly established.

“Through unremitting efforts, we will reverse the trend of a widening income gap as soon as possibleand ensure that the people share more in the fruits of reform and development,” he said.

Special Report: NPC, CPPCC Annual Sessions 2011

Political advisor expects more competitiveness of SOEs [March 8, 2011] (emphasis is mine)

A Chinese political advisor on Tuesday suggested that state-owned enterprises (SOE) raise their competitiveness only in the key sectors that bear on the lifeline of the national economy.

Large SOEs had benefited from the country’s loose monetary policy in recent years and taken the bulk of banking loans, and excessively expanded into sectors such as real estate and non-ferrous metals, said Ou Chengzhong, a member of the National Committee of the Chinese People’s Political Consultative Conference (CPPCC).

Among the 398 economic sectors, SOEs were present at 380 and about 40 percent of them were involved in commonplace manufacturing, processing and commercial and trade sectors, according to the figures quoted by Ou.

Although China is regarded as one of the leading industrial manufacturers in the world, China has to import key equipment in some fields, the political advisor said at the on-going annual session of the CPPCC National Committee.

In this sense, SOEs have to raise their competitiveness with the focus on innovation, high technology, core manufacturing know-how and world-class brands, Ou said.

On the other hand, he suggested that SOEs exit from non-essential economic sectors to make room for the growth of private businesses.

SOEs employ less than 30 million people, while 160 million people work in non-governmental businesses, according to Ou.

China to let 20 more SOEs fully exit real estate business this year [Feb 22, 2011] (emphasis is mine)

More than 20 centrally administered state-owned enterprises (SOEs), whose core business is not property, will fully exit the real estate business this year.

Shao Ning, deputy chairman of the State-owned Assets Supervision and Administration Commission of the State Council(SASAC), the SOEs regulator, said Tuesday.

Fourteen SOEs exited the real estate sector last year, Shao told a press conference.

He said some companies need time to finish ongoing projects before they could fully retreat from the real estate business and focus on their core operations.

To curb asset bubbles, the SASAC banned 78 SOEs from investing in property in March last year as property was not their core business.

Shao also said the SASAC would make public the income of the SOEs’ executives when necessary.

Currently, China has 121 centrally administered state-owned enterprises with their total assets worth nearly 24 trillion yuan (3.65 trillion U.S. dollars).

Chinese vice premier urges SOEs to boost growth mode transformation [April 12, 2011] (emphasis is mine)

Chinese Vice Premier Zhang DejiangTuesday called for state-owned enterprises (SOEs) to make greater efforts to boost economic development mode transformation.

Zhang made the remarks during his inspection tour of some SOEs in Beijing, including China MinmetalsCorporation, China State Shipbuilding Corporation and the State Nuclear Power Technology Corporation Ltd. (SNPTC).

SOEs are the backbone of the national economy and it is very important for them to maintain a stable and relatively fast growth momentum to ensure the continual and healthy development of the economy,” Zhang said.

“With impacts of the global financial crisisstill lingering, China’s economic growth faces not only historic opportunities, but also risks and challenges,” Zhang said.

More efforts should be made to expand overseas markets, improve management, boost scientific innovations and highlight production safety, Zhang also said during the inspection tour.

Full text: Report on China’s economic, social development plan (2011)
5. Reform and opening up were further intensified. [March 17, 2011] (emphasis is mine)

In terms of enterprise reforms, the reform to institute a corporate system or a stockholding system was carried out in over 70% of the central state-owned enterprises (SOEs) and enterprises subordinate to them, and the pilot project for standardizing boards of directors was extended to 32 central SOEs. We made further progress in reforming the power industry, postal services and public utilities. We also promulgated and implemented a number of supporting policies to promote the development of the non-public sector and small and medium-sized enterprises.

In terms of reforming the fiscal and taxation systems, we implemented the reform to place county finances directly under the management of provincial governments in 970 counties across 27 provinces; conducted trials in the western region on the reform of resource taxes on oil and natural gas; and extended the urban construction and maintenance tax and education surcharge to foreign enterprises and nationals.

The development level of the open economy was raised further. We adhered to the strategies of diversifying markets and competing on quality; tightened control over exports of resource products and products whose production is energy-intensive or highly polluting; increased imports of raw materials in short supply on the domestic market, energy-intensive products, advanced technology, and key spare parts and components; and eased the trade imbalance. Total import and export volume reached US$2.97276 trillion in 2010, an increase of 34.7%. Exports rose 31.3%, imports rose 38.7%, and the trade surplus was down 6.4% from the previous year. We introduced the guidelines on better utilizing foreign investment and guided foreign investments toward high-end manufacturing, high-tech industries, modern service industries, new energy sources, energy conservation and environmental protection industries, and the central and western regions. Utilized foreign direct investment in 2010 (excluding the banking, securities and insurance sectors) totaled $105.74 billion, up 17.4%. Disbursed foreign loans reached $20.5 billion, up 57%. We vigorously implemented the “go global” strategy and made further progress in a number of major outward investment projects. Non-financial outward direct investment for the year amounted to $59 billion, an increase of 36.3%. Receipts from overseas project contracting operations reached $92.2 billion, an increase of 18.7%.

China’s central SOEs perform well abroad: regulator [Feb 22, 2011] (emphasis is mine)

China’s centrally administered state-owned enterprises (SOEs) had posted healthy profits in foreign markets since they adopted the strategy of going global in recent years, government official said Tuesday.

In 2009, China’s SOEs’ overseas assets took up 19 percent of their total assets while profits made in foreign markets accounted for 37 percent of the total, Shao Ning, deputy chairman of the State-owned Assets Supervision and Administration Commission of the State Council(SASAC), the SOEs regulator, said at a press conference.

While noting the commendable performances, Shao also warned of the potential risks.

“China’s SOEs generally lack international management skills. Moreover, they are not familiar with the foreign laws and market standards there,” Shao said.

He said the SASAC is working on a range of proposals to better regulate asset management of the SOEs in overseas markets.

Currently, China has 121 centrally administered SOEs with their total assets worth nearly 24 trillion yuan (3.65 trillion U.S. dollars).

Central SOEs sign contracts worth 293 bln yuan with Guizhou [Dec 26, 2010] (emphasis is mine)

Representatives for a number of centrally-administered state-owned enterprises (SOEs) signed 47 contracts worth 292.9 billion yuan (about 44.38 billion U.S. dollars) with authorities of southwest China’s Guizhou ProvinceSunday.

The 47 projects included industries such as minerals intensive processing, manufacturing, electricity, as well as transportation, said Wang Yong, director of the State-Owned Assets Supervision and Administration Commission of the State Council.

Thirty-three of the 47 projects will begin construction in 2011, with the investment totaling 237.6 billion yuan. The other 14 projects will start construction in 2012.

In recent years, a number of central SOEs, including the country’s oil giants PetroChina and Sinopec, have invested in Guizhou, a land-locked and poverty-ridden region in west China, which has boosted the local economic development and also helped the companies to expand in terms of strength and scale, Wang said.

“I hope central SOEs will continue to participate in Guizhou’s social and economic development and seek strategic cooperation with the province to push forward its leapfrog development,” Wang said.

China launches new state asset management company to accelerate reshuffle [Dec 22, 2010] (emphasis is mine)

China on Wednesday unveiled a new asset management company, with the aim of restructuring uncompetitive state-owned enterprises (SOEs) through stepped-up mergers.

The new firm, named China Reform Holdings Corporation Ltd., will focus on “reorganizing small SOEs which have no bearing on national security and are not crucially important to the national economy,” the State-owned Assets Supervision and Administration Commission (SASAC), the country’s regulator for SOEs said in a statement.

The first-phase registered capital of the new company, which is wholly owned by SASAC, is 4.5 billion yuan (681 million U.S. dollars). SASAC has not yet revealed which companies will be involved in the reshuffle.

Xie Qihua, former chairwoman of the Baosteel Group Corporation, China’s largest steel maker, has been appointed as board chairwoman of the new company. Liu Dongsheng, an SASAC official, will act as the general manager, it said.

“The launch of the new company marks an important move to advance an optimized restructuringof the distribution concerning state-owned economic entities,” Wang Yong, deputy director of SASAC, said at the launching ceremony.

The new company will participate in the share-holding reform of those centrally-administered enterprises featuring lesser importance or smaller scale, and will also invest in emerging industries with strategic importance, he said.

China’s SOEs include SOEs directly controlled by the central government and SOEs supervised by local governments, but exclude state-owned financial enterprises.

Profits of China’s state-owned enterprises (SOEs) in the first 11 months hit 1.81 trillion yuan (271.92 billion U.S. dollars), up 43.1 percent year on year, according to figures released by the Ministry of Finance (MOF) on Dec.17.

CRHC announces China Huaxing Group deal [May 26, 2011] (emphasis is mine)

State asset management company China Reform Holdings Corp (CRHC) announced Wednesday that it has formally acquired its first central government-controlled State-owned enterprise (SOE), China Huaxing Group.

In a meeting held Monday, the State-owned Assets Supervision and Administration Commission (SASAC) announced that China Huaxing Group, which is active in sectors including chemicals and real estate, had been integrated into CRHC, the company said in a newsletter published on its website.

“Integrating Huaxing into CRHC is the commission’s strategy to promote the restructuring and reform of central government controlled SOEs by leveraging the platform of CRHC. It marks the formal kick-off of asset management operations by CRHC,” Shao Ning, the commission’s vice director, said.

CRHC holds the property rights over State-owned assets in the SOEs it merges and exercises the rights as an investor in these companies.

The restructuring of central government-controlled SOEs will speed up following the Huaxing acquisition, observers predicted.

Launched at the end of last year with 4.5 billion yuan ($692.91 million) in registered capital, CRHC, the third asset management company formed under SASAC, is mainly targeting small and underperforming SOEs in sectors that do not affect national security or core economic areas.

Founded in 1995 with registered capital of 819.66 million yuan, Huaxing is active in sectors as diverse as chemicals, real estate, IT and trade.

However, the conglomerate has been a loss maker. In 2009, it posted a loss of 40 million yuan and was one of very few SOEs running in the red, according to a report by China Business News Wednesday.

China has in recent years stepped up efforts to restructure central government controlled SOEs following initial SOE reform between 1998 and 2003. The number of central government-controlled SOEs has fallen from 196 to its current total of 120 following Huaxing’s integration into CRHC.

The key to reforming these SOEs is making them more market-oriented, Ding Yifan, a researcher with the Development and Research Center of the State Council, told the Global Times. Simply reducing their numbers does not amount to real reform, he said.

The Chinese government currently maintains absolute control of companies in key sectors such as electricity grids, oil and gas.

Profits of local SOEs continue dropping but declines narrow [Dec 24, 2009] (emphasis is mine)

Profits of China’s state-owned enterprises excluding those administered by the central government continued to drop in the first 11 months from a year ago, but the rate of decline narrowed sharply.

The SOEs posted combined profits of 258.39 billion yuan (38 billion U.S. dollars), down 6.5 percent year on year, the State-owned Assets Supervision and Administration Commission (SASAC) announced Thursday.

The rate of decline was 11.7 percentage points lower than that for the first ten months, the country’s assets watchdog said.

Business revenue of the SOEs grew 2.8 percent year on year to 5.9 trillion yuan in the first 11 months.

The SOEs include enterprises affiliated to 82 central departments, and those administered by provincial, regional and municipal governments but exclude 131 enterprises administered by the SASAC.

Profits in China’s gov’t firms continue to fall but decline eases [Dec 18, 2009] (emphasis is mine)

Profits in China’s state-ownedenterprises (SOEs) continued falling in the first 11 months from a year earlier, but the rate of decline eased markedly because of a lower comparison base.

The SOEs posted combined profits of 1.19 trillion yuan (174.1 billion U.S. dollars) in the first 11 months, down 1.9 percent compared with the same period of last year, the Ministry of Finance announced Friday.

During the January-October period, profits in the SOEs declined 10.6 percent year on year, compared with a 17.6-percent annual drop during the January-September period.

In November, SOE profits edged up 0.8 percent from the previous month to 124.6 billion yuan. Business revenue of the companies rose 9.6 percent to 2.3 trillion yuan in November from October.

In the first 11 months last year, China’s SOEs experienced a sharp year-on-year drop in profits of 15.7 percent, as the impact of the global financial crisisstarted to weigh on the country’s economy with falling enterprise output and profitability.

The SOEs covered by the ministry statistics included 131 enterprises administered by the State-owned Assets Supervision and Administration Commission, on behalf of the central government, enterprises affiliated to 82 central departments, and those administered by provincial, regional and municipal governments.

Non-SOEs employ 80% of workforce in China’s industrial sector [Nov 23, 2009] (emphasis is mine)

Non-state-owned enterprises (non-SOEs) employed 70 million people, or 80 percent of China’s total workforce in the industrial sector in 2008, the National Bureau of Statistics(NBS) said in a statement Monday.

Despite the global economic downturn, non-state-owned industrial firms still hired 15 percent more people in 2008 than the previous year, the NBS said on its website.

Profits of these enterprises jumped 31.4 percent from 2007 while the figure for state-owned industrial firms dropped 16 percent.

There were 28 percent more non-state-owned industrial enterprises in 2008 than 2007.

The NBS gave no further details about the figures.

The non-public economy has developed rapidly since the State Council promulgated the first governmental document in 2005 to support and facilitate the growth of non-public enterprises.

According to the document, non-public enterprises enjoyed the same kind of market access with foreign capital and the same kind of treatment in project approval, financing, taxation, land use, foreign trade and economic cooperation as other businesses.

The number of people working in non-state-owned industrial firms had reached 70.4 million in 2008, a rise of 40 percent from 2005, said the statement.

Profits of non-state-owned industrial firms were up 160 percent in the four years to 2008. They represented more than 70 percent of the total profits created by Chinese industrial enterprises, up from 56 percent in 2005.

The number of non-SOEs in the industrial sector was up 65.7 percent from 2005 to 404,800 in 2008, accounting for 95 percent of the country’s total industrial enterprises.

The statistics were based on industrial enterprises with annual sales revenue of more than 5 million yuan (732,064 U.S. dollars), said the statement.

Two thirds of China’s SOE giants become share-holding companies [Aug 26, 2008] (emphasis is mine)

Almost two thirds of China’s centrally-administered state-owned enterprises (SOEs) and their subsidiaries become share-holding companies after three decades of reform, the country’s top state assets regulator said on Monday.

Li Rongrong, director of the State-owned Assets Supervision and Administration Commission (SASAC), said 64.2 percent of the SOEs and their subsidiaries had undertaken share-holding reforms, compared with 30.4 percent in 2002.

A number of large SOEs had gone public in both domestic and foreign stock markets. Of about 1,500 listed companies in China’s A-share stock markets, more than 1,100 were wholly or partly state-owned, he said.

Seventy-eight centrally-administered SOEs were listed in Hong Kong, New York and Singapore stock markets.

Meanwhile, the country’s state-owned economy was gradually converging into critical sectors that bore great significance to state security and the national economy.

Critical sectors such as oil, petrochemicals, power, national defense, telecommunications, transportation, and mining comprised about 83 percent of the total assets of centrally-administered SOEs, according to the SASAC.

These SOE giants had shouldered almost all the production of crude oil and natural gas and provided all the basic telecommunications and 55 percent of the country’s power supply, while 82 percent of civil aviation servicesalso came from those SOEs.

With deepening reforms, the number of China’s SOEs were declining, but they were growing.

The country has 149 centrally-administered SOEs, down from 196 in 2003, and the number is expected to shrink to between 80 and 100 by 2010, through merger and restructuring, according to SASAC.

Though declining in numbers, the major SOEs accounted for 35.91 percent of total assets, 61.54 of sales revenues, and 63.25 percent of profits of all the SOEs in the country.

From 2002 to 2007, centrally-administered SOEs saw their assets rise by 1.5 trillion yuan (218.95 billion U.S. dollars), sales by 1.3 trillion yuan, and profits by 150 billion yuan each year.

Cabinet approves 3 technological projects [Dec 26, 2007] (emphasis is mine)

China’s State Council, or the cabinet, approved three national technological projects in the fields of telecommunications, water pollution control, and pharmaceutical manufacturing and innovation, during Wednesday’s meeting.

Premier Wen Jiabaopresided over the executive meeting that deliberated the three projects. The three are a next-generation broadband wireless mobile communication network, water pollution control and treatment, and the manufacture and innovation of key new drugs.

“These technological projects, all set in the national medium- and long-term science and technology development plan, are of great significance to boosting China’s independent innovation capability and industrial competitiveness,” the meeting pointed out.

It said that “after a scientific, democratic and strict demonstration”, the three schemes had become ripe for inauguration.

The next-generation communication network represents the main direction of communications development. Applying it will greatly enhance the overall competitiveness and innovative capacity of China’s wireless mobile communication, and lift the industry to a more advanced world level, according to the meeting.

It said that the water pollution control projectwould provide solid technological support to address environmental woes of major water sources including the Yangtze River and Yellow River, to achieve an “energy saving and emission reduction” goal.

The drug innovation projectwould target the treatment and prevention of serious diseases and innovation of key drugs so as to offer the public safe, effective and cheap medical products, the meeting said.

The meeting also heard a report on the inspection and supervision of central enterprises, made by the State-owned Assets Supervision and Administration Commission, which was directly under the cabinet.

Central enterprises have deepened the reform, accelerated restructuringand maintained a sound momentum of sustainable and fast development,” it said.

However, violation of laws and regulations occasionally occurred due to relatively high debt and poor profits.

The meeting said that greater attention should be paid to SOE reform and management and supervision of state assets to promote sound development. It also asked enterprises to invest more in innovation, deepen SOEs’ shareholding reform, and safeguard state asset security.

China’s first state asset law, designed to protect state-owned assets from being illegally seized and to maintain the country’s basic economic system, was submitted last Sunday and is being given initial consideration by the top legislature.

China’s central SOEs set to get smaller in size, stronger in competence

statistics revealed that the total assets of central SOEs had already jumped 146 percent. In addition, profits increased two-fold when the number of SOEs dropped to about 160 last year from 196 in 2002.

Reforms were at the core of these impressive improvements of the SOEs, previously known for their “plump size and slack performance”.

After China’s SOEs were separated from administrative government bodies to exist as independent enterprises, a major shift from the planned economy, these enterprises went through further shareholder reforms to build themselves into real corporate entities.

In 2007, the pace of such reforms accelerated amid the country’s efforts to further promote the leading role of these large enterprises, the “backbone” of the national economy, said Vice Premier Zeng Peiyan.

As an important part of shareholder reform, another nine central SOEs offered initial public offerings this year, adding to the 33 SOEs listed domestically and abroad since the listing scheme launched in 2003.

Li Rongrong, head of the SASAC, was supportive of the overseas listings of Chinese enterprises, saying overseas markets had more sophisticated approaches that could help improve management of Chinese SOEs.

In a pilot move, the SOEs began to have outside directors. This was meant to make decision makers more detached from executive staff to better protect the interests of the company and common shareholders.

Currently, 19 such SOEs, including China Baosteel Group and China Shenhua Group, have picked up 66 outsider directors. The outside directors at 17 companies consisted of half or more of their board of directors members.

Since 2003, the SOEs started to recruit senior managerial staff in a more open way, whereas in the past these posts were not publicly available.

This year, 22 vacancies for high-level positions in central SOEs attracted 1,603 applicants. These included 25 foreigners and 10 from Hong Kong, Taiwan and Macau.

Li Fangyong, deputy general manager of China Aviation Industry Corporation I (AVIC I), and Jiang Zhenxin, deputy general manager of China Netcom Group, were among those who finally beat their rival competitors. No foreigners have been recruited yet.

“Reforms have pushed central SOEs onto the front-line of the market to compete with other enterprises, including international companies. It is this kind of competition that has marked up the competitiveness of these SOEs,” said SASAC analyst Peng Huagang.

BRIGHT FUTURE AHEAD? [Dec 21, 2007] (emphasis is mine)

Chinese SOEs are still dwarfed in strength and core competitiveness when compared with multinationals and first-class international companies, said SASAC head Li Rongrong. He cited development imbalance among these enterprises, even within a single enterprise.

Nearly 70 percent of aggregate profits were generated by nine leading enterprises, including China Mobile, China National Petroleum Corporation, China Baosteel and the State Grid in 2006.

Corresponding information for this year was not revealed by the SASAC. It only said that shipbuilding, automotive and shipping enterprises were becoming new, significant profit earners, joining those in the petroleum, power generation and telecom sectors.

However, Li did express concern over the financial conditions of central SOEs at a working meeting recently held in Beijing. “Profitability of some enterprises was not well-grounded as their profits were concentrated in a few subsidiaries. Some enterprises reported a lower profit rate in core businessescompared with a year earlier,” he said.

About 31.2 percent of newly-earned profits of central SOEs were in the category of non-regular revenue. “This non-regular revenue usually comes from return from investment in other than core businesses, largely investment in securities,” said Liu Cheng, a University of Science and Technology Beijing professor.

Yet, experts believed the growth of enterprises was undoubtedly behind the profit surge of central SOEs, and investment returns from securities had made limited contribution to their profitability.

Profits earned by central SOEs have been increasing steadily since 1998, and there was no such fluctuation as to copy that of the stock market, said World Bank (WB) economist Zhang Chunlin.

SASAC’s Li also pointed out some SOEs relied too heavily on bank loans to expand their businesses. This increased their exposure to financial risk. The SASAC statistics showed that 18 enterprises expected to cover more than 70 percent of their investment budget with bank loans.

“These are ‘life and death’ issues of enterprises, and they deserve due attention from top management,” Li said.

Li said SASAC would further deepen reforms to build a modern corporate system into central SOEs in the coming year, upholding the goal of building “larger and stronger” individual enterprises.

The SASAC planned to cut the number of SOEs under its supervision to less than 100 by 2010. At the same time, it would get 30 such enterprises ranked among the world’s top 500 companies by 2015 at the latest, up from 16 for 2007.

Despite arguments saying large and well-performing SOEs should get listed on the domestic market to avoid sharing profits with foreign investors that were largely a result of government support and monopolized access to state resources, Li said SASAC encouraged qualified SOEs to list as a whole in 2008, and to list on both domestic and overseas markets.

III. Current situation: mostly related to the China Mobile

Chinese media report flight of state assets [June 16, 2011] (emphasis is mine)

On its front page today, the New Express newspaper, a spin-off of Guangzhou’s Yangcheng Evening News, reports figures released by an enforcement division of China’s central bank showing that since the mid-1990s an estimated 16-18,000 Party, government, police and state-owned enterprise officials from China have disappeared overseas with approximately 800 billion yuan, or roughly 123.6 billion US dollars.

This news was first reported yesterday by Beijing Youth Daily reporter Cheng Jie (程婕), in a piece re-posted widely across the internet [HERE too].

The basis for the reports from Beijing Youth Daily and the New Express is a document released on the internet by the Anti-Money Laundering Bureau (Security Bureau) of the People’s Bank of China, China’s central bank. The report is called, “Research on the Channels and Detection Methods for the Transfer Overseas of Asset by Corrupt Elements in Our Country” (我国腐败分子向境外转移资产的途径及监测方法研究).

Audit reveals more financial indiscrepancies and fraud [May 23, 2011] (emphasis is mine)

State-owned enterprises (SOEs) were once again thrown into a fresh image crisis over the weekend. The turmoil came after China’s audit watchdog published irregular practices and disciplinary violations in the financial statements of 17 SOEs operating directly by the central government.

According to reports released by the National Audit Office on Friday, the irregular practices include overstating earnings, understating assets with improper accounting procedures, concealing information about investment activities overseas, evading taxes, excessive bonuses and forged invoices.

The office said in a statement on Friday inadequate investment decisions, which led to losses or potential losses of State-owned assets and improper management of their subsidiaries, are the key problems contributing to irregularities in the financial statements of these SOEs audited. Second and third tier SOEs were found to be guilty of the most infractions.

Sinosteel Corporation overstated 1.99 billion yuan ($306.48 million) of sales earnings between 2007 and 2009. The company was also found to have more problems related to investment overseas.

Sinosteel International Holding Co, a subsidiary of Sinosteel Corporation, failed to adequately report three investment projects overseas.

Provident Faith Investment, a subsidiary of Sinosteel International Holding Co, was found unable to recover 1.85 million yuan in overseas futures transactions made through overseas illegal futures brokers.

During the time when the company was charged with managing the capital of the Sinosteel Corporation overseas, Golden Prosperity Development Co, another subsidiary of Sinosteel International Holding Co, withdrew large sums of cash to pay commissions to individuals.

The company also transferred part of the funds to the personal accounts of working staff in other parts of the group for daily expenditures for the institution.

Days before the audit report was released, the State-owned Assets Supervision and Administration Commission (SASAC) announced it would remove Huang Tianwen, president and deputy Party Secretary of the Sinosteel Corporation, from his position without giving details.

Other SOEs including the China Three Gorges Corp, China Unicom and China National Nuclear Corp were also found to have problems managing their funds.

The audit, conducted last year, once again threw into the limelight the SOEs who have long been made the target of public attacks due to their monopolies, high incomes and privilege.

A spokesman for the SASAC said Saturday they would increase transparency of SOE operations.

Wang Yukai, professor of governance at the Chinese Academy of Governance, said the irregularities and violations exposed problems in the governance of SOEs, making them hard to supervise.

“Besides, some SOEs’ leaders are too eager to impress their supervisors by making instant profits through investments overseas during their tenure, but lack proper investment expertise,” he said.

China’s state-owned firms mired in scandals [June 16, 2011] (emphasis is mine)

China’s state-owned enterprises have been hit by scandal after the country’s supreme audit office announced in May that it had uncovered several acts of misconduct such as tax evasion and the inappropriate use of company money by officials in 17 state-owned firms.

The National Audit Office of the People’s Republic of China (CNAO) made the announcement after reviewing the financial statements of these companies, which included the China United Network Communications Group Co and the China Three Gorges Corp, which operates the Three Gorges Dam on the Yangtze.

A total of 65 company representatives are currently under investigation, according to the office.

Prior to the investigation, China Petroleum & Chemical Corp (Sinopec)was revealed to have squandered millions of yuan on expensive wines and illegally awarded bonuses to its employees.

In addition, China’s state-owned Xinhua news agency reported that the Anhui branch of the State Grid Corporation of Chinahad illegally provided 300 of its senior employees with private cars.

Several officials from leading telecom firm China Mobileare also said to have been under investigation since 2009 for inappropriate corporate behavior.

The scandals, which were initially discussed intensively on the internet, have now become a nationwide subject of debate after coming under the media spotlight for over a month.

After the Sinopec “expensive wine” scandal, the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) convened a meeting with the companies to discuss public opinion — and discontent — as well as ways to resolve the issue, according to the Chinese-language Beijing News.

At a meeting to explain the company’s extravagant spending on wine, Sinopec director Li Chunguang complained that he could not understand why the public was criticizing companies that contribute billions of yuan in taxes to the country each year.

In an effort to improve industry’s image, SASAC released the contact information of the spokespersons of 120 state-owned companies to the public in February this year.

Furthermore, sources said that some companies had also hired public relations companies in recent years, and invested several million yuan to improve their interactions with the media and public.

Economist Hua Sheng said that the public’s anger towards state-owned companies is a reflection of their dissatisfaction about the unequal distribution of income and government finances.

Liu Cheng, a professor at the University of Science and Technology in Beijing, noted that the reason these companies have become targets for public anger is because they had not fulfilled their social responsibility of serving the national interest. Instead, they have become tools for personal gain, he said.

Chinese professionals prefer domestic firms [June 9, 2011] (emphasis is mine)

SHANGHAI – With the growth of the national economy and the continuous development of Chinese enterprises, more middle- and high-level professionals in China now prefer to work for domestic companies rather than foreign-owned enterprises, human resources experts said.

“Multinational companies have long been in a favorable position in the recruiting market due to their liberal reward and advanced management culture,” said Chen Jiewei, senior consulting manager with China International Intellectech Corporation (CIIC), a Shanghai-based HR services company.

“But over the past five years, Chinese companies have been doing excellently and many of them have been listed abroad. They have demonstrated their competitive strength,” Chen told China Daily, “Now they can offer salaries and bonus plans that are competitive with foreign companies, which makes them increasingly attractive for high-level management professionals.”

A report from CIIC said that the annual salary for management positions in Chinese enterprises is basically equal to that in Japanese enterprises, about 200,000 yuan ($30,880) a year (before tax), while for European and US enterprises it is about 250,000 yuan a year. For director positions, European and US enterprises generally provide an annual salary of more than 400,000 yuan, while Chinese enterprises offer more than 300,000 yuan and Japanese enterprises about 300,000 yuan.

For senior management positions, the annual salary in a European or US enterprise is about 800,000 yuan, while large Chinese enterprises offer about 600,000 yuan and Japanese enterprises about 500,000 yuan.

But Chen said that it is not only the salaries that are driving high-level talent toward Chinese companies. It is also a better personal career path.

“Multinational companies have developed for a long time in China, and practiced a localization strategy, but even so, a lot of senior management positions are still dominated by foreigners. High-level Chinese staff often find it’s hard to break through the bottleneck and advance,” Chen explained. “They have no scope for their particular talents.”

“Some large Chinese companies, on the other hand, can provide sufficient room for people’s career development,” Chen added.

“Chinese enterprises have developed very fast and improved effectively over the past years in terms of the management level, working environment, compensation packages, as well as the promotion system. They have competitive advantages over their foreign counterparts in recruiting staff,” said a 33- year-old man, surnamed Wang, who declined to give his full name.

Wang currently works as a department manager in a US technology company but he hopes he can move to a Chinese company, especially a State-owned company.

State-owned enterprises have improved their market performance and have comprehensive competitiveness. That means there may be more opportunities for self-development,” Wang said.

State-owned enterprises overtook foreign and private enterprises as the top destination for job-seeking graduates in 2010, according to a survey of 200,000 students conducted by ChinaHR.com. Eight of the top 10 companies named in the survey are State-owned.

Chinese companies are more popular among students born between 1980 and 1990, majoring in science and engineering, according to a survey by Aon Hewitt, a global human capital consulting company.

Aon Hewitt polled graduates over the past two years and found that China Mobile, Alibaba and Haier have overtaken Google and P&G to become the most popular employers among graduates.

Expansion of Central SOEs Causes Concern [June 9, 2011] (emphasis is mine)

Many of China’s provincial governments have been enthusiastic about getting investments from the country’s most powerful enterprises to spur development of their local areas.

Local officials have signed agreements with companies controlled by the central government, adding up to trillions of yuan.

These mega contracts have triggered concerns among both economists and economic regulators.

At the latest signing ceremony in Beijing, representatives from Henan Province signed more than one hundred agreements with enterprises controlled by the central government. The contracts are worth some 300 billion yuan or more than 40 billion US dollars in total.

These projects involve scores of state-owned enterprises, including China Mobile, a giant in the telecom industry.

Wang Jianzhou, Chairman of the company’s Board of Directors, reveals that China Mobile’s investment in Henan will reach 20 billion yuan over the next three years.

“We are planning to install new equipment in Henan to build a call center and an internet data center.”

Shi Jichun, Deputy Governor of Henan Province, explains the motives behind the cooperation.

“Our cooperation with the state-owned enterprises can benefit local economic development in terms of upgrading our industries and introducing new economic growth patterns.”

During the past year, similar motives have driven a dozen provincial governmentsto send delegations to Beijing, where they scramble for the favor of state-owned enterprises.

So far, the total value of agreements signed between them has amounted to more than six trillion yuan.

However, Dong Yuping, an economic researcher with the Chinese Academy of Social Sciences, says he’s concerned about the negative impact of the massive expansion of state-owned enterprises.

“The state-owned enterprises have been holding sway in sectors concerning national economic security, however they still want to engage in other sectors where they compete with private enterprises. This surely puts the private operators at a disadvantage. Meanwhile, I don’t think those multi-billion agreements will necessarily bring about the intended benefits to local governments.”

The country’s top regulator of state-owned enterprises has expressed similar concerns.

Wang Yong is Chairman of the State-Owned Assets Supervision and Administration Commission.

The companies’ cooperation with local governments should not deviate from their core businesses. They should adjust their own structures to become stronger in that area, instead of blindly expanding in size and quantity.”

Chinese enterprises are basically divided into two categories: state-owned and private. The central government directly controls more than 100 of the powerful state-owned companies. These elite enterprises control the nerve centers of the national economy, like oil industries, telecommunications and power generation.

Telecoms Carriers Put Under Anti-Corruption Review [May 27, 2011] (emphasis is mine)

Investigation teams from the party disciplinary commission were sent to China Mobile, China Unicom and China Telecom.

The government has launched an anti-corruption investigation over China’s big three state-owned telecom carriers that monopolize the industry, Caixin learnt from with several sources.

The Central Commission for Discipline Inspection of the Communist Party of China sent investigation teams each to China Mobile, China Unicom and China Telecom, targeting middle-level managerial staff and above, according to the sources.

These executives have been ordered to turn in their passports temporarily, said the sources.

Over the past year, many senior executives at China Mobile have been found to be involved in major corruption scandals, with several cases surrounding behind-the-scenes deals with the company’s service providers.

In late 2009, Zhang Chunjiang, China Mobile’s former vice chairman, was sacked and placed under investigation on allegations of corruption.

China launches probe into alleged graft at telcos [June 2, 2011]

The government and telecom firms have refused to comment on the investigation. But public commentary on dismissed executives at China Mobile has spread like wildfire. The investigation will last until June, during which all middle-level and above administrative staff have been asked to submit their passports.

Seven high-ranking China Mobile executives have been punished since 2009. Former Party chief and deputy general manager of China Mobile Zhang Chunjiang has been removed from his official post and expelled from the CPC for taking bribes. Shi Wanzhong, general manager of human resources at China Mobile, was detained for accepting bribes from Siemens. Lin Donghua, former deputy general manager of China Mobile’s Hubei branch, was also punished for serious corruption.

In March 2010, several regulatory authorities opened an investigation of Li Xiangdong, former general manager of China Mobile Sichuan’s wireless music base. After meeting with central government auditors to discuss his assets and the allocation of company funds, he disappeared into the night with hundreds of millions of RMB. Luckily, he was caught by police before he could flee the country.

China Mobile recently confirmed that Ma Li, deputy general manager of the company’s data division, was under investigation on suspicion of “serious disciplinary violations.” Ye Bing, former CEO of ASPire Holdings, a subsidiary of China Mobile, had also been taken away by authorities for investigation. Ye Bing was appointed as CEO of ASPire Holdings in 2008, which provides data services for China Mobile.

“Lack of efficient supervision on high-profile executives of governments and companies has led to rent seeking behavior,” said Fu Liang, an independent telecommunications analyst.

China’s Seizure of China Mobile Executive Leads to Wider Probe [June 1, 2011] (emphasis is mine)

China’s seizure of a China Mobile Ltd. executive on graft allegations in March led to a probe of more than 60 people that may involve 350 million yuan ($54 million) of “illegal money,”the official Xinhua News Agency said.

China Unicom (Hong Kong) Ltd., and China Telecom Corp., the nation’s second- and third-largest carriers after China Mobile, are included in the investigation, according to today’s Xinhua report, which didn’t say what the alleged corruption entailed.

The three operators are adjusting their business- cooperation policies “to reduce the corruption risk,” Xinhua said. The allegations come amid Chinese media reports that the government will overhaul leadership at the nation’s biggest telecommunications carriers.

The corruption probe may be an attempt to clear up any problems before new management takes over to allow them to start with a clean slate, Jim Tang, an analyst at Shenyin Wanguo Securities Co. in Shanghai, said in a phone interview today. If the investigation means China Mobile is addressing problems, it’s a good thing in the long run, he said.

Tang rates China Mobile and China Telecom “neutral,” and China Unicom “outperform.”

China Mobile gained 0.6 percent to HK$71.45 at 10:45 a.m. in Hong Kong Stock Exchange trading. The shares have dropped 7.5 percent this year, compared with a 2.7 percent advance in the benchmark Hang Seng Index. China Unicom fell 1.3 percent to HK$17.04 while China Telecom was unchanged at HK$4.66.

Executive Reshuffle

Sophia Tso, a Unicom spokeswoman, and Jacky Yung, a spokesman for China Telecom, yesterday denied reports about planned management changes at their respective companies. Tso and Yung didn’t immediately return calls today regarding the Xinhua report on the corruption probe.

Rainie Lei, a spokeswoman at China Mobile, didn’t return calls or e-mailed requests for comment on the reports about management changes.

Caijing magazine reported yesterday that Xi Guohua, vice minister at the Ministry of Industry and Information Technology, will replace Wang Jianzhou, 62, as chairman at China Mobile. China Unicom Chairman Chang Xiaobing will have his post taken by President Lu Yimin and become chairman of China Telecom Corp., while China Telecom Chairman Wang Xiaochu will become governor of Yunnan province, according to the magazine.

Zhao Yi, a spokesman for China Mobile, said he couldn’t immediately comment on today’s Xinhua report or provide contact information for Ma Li, the data department deputy manager who the official newswire reported was seized by anti-graft officials.

China Mobile’s value-added data such as mobile music services “were an essential driver of total revenue growth” last year, accounting for 31 percent of operating revenue in 2010, Chairman Wang said in March.

China Mobile said 549 million customers made use of value- added services in the first quarter of this year, and 476 million used its wireless music service. The value-added services were “the driving force” of sales growth in the first quarter, the company said in April.

On Way to Beijing, China Mobile Chief Crashes [July 16, 2010]

A financial misconduct probe at China Mobile’s Sichuan branch has shattered executive Li Hua’s promotion dream

Li Hua worked hard and waited years for the career leap that he triumphantly announced to friends at a banquet on the eve of Spring Festival.

Very soon, Li told the dinner guests earlier this year, he would be transferred from Chengdu to the telecom group’s headquarters in Beijing.

Moreover, Li said he would rise from his current job as Sichuan Province general manager and regional party secretary for China Mobile to a coveted front-office position as a group vice president.

A month later, however, a nightmare overwhelmed Li’s career dream. A subordinate named Li Xiangdong, who directed the company’s digital music and data department, grabbed company cash and fled the country after a government audit found discrepancies tied to the company’s business with a value-added service provider.

Within weeks, Communist Party investigators looking into further evidence of malfeasance at China Mobile were knocking on Li’s door. Now, no longer in line for a headquarters post, Li is being detained on charges of financial misconduct.

In addition, Li’s case may be connected to the detention by party investigators in December of executive Zhang Chunjiang, a former China Mobile vice president and the company’s national party secretary.

A source at China Mobile told Caixin that Li’s case is being handled by provincial party officials in Sichuan but directly supervised by the party’s Central Commission for Discipline Inspection, which rarely gives such close attention to provincial matters.

Caixin also learned that his most serious charges may be connected to deals with an equipment supplier. Before Li’s case was made public, the Sichuan office of China Mobile sent an internal memo stating Li had offended a powerful, well-connected equipment supplier.

“It’s quite possible that Li fell into trouble because of this” supplier issue, said a source.

Several equipment suppliers are currently assisting authorities in their investigation. But some officials from equipment companies reportedly have, like Li Xiangdong, fled China.

Li, who earlier hand-picked Li Xiangdong for a promotion, had been barred from leaving China after the disappearance on grounds that he was needed to help investigators looking into the case.

Li earlier told Caixin the disappearance was “not related to any other person” at China Mobile’s Sichuan division. Yet financial misconduct linked to the digital music and data department also apparently involves Li, who worked closely on its development with Li Xiangdong.

The company launched the moneymaking division four years ago with about 1 billion yuan. Today, its annual operating revenues exceed 22 billion yuan.

Ladder Climber

In his long quest for a promotion to headquarters, Li built a network of personal contacts so extensive that he may have seemed untouchable. He was known in the industry for being outspoken, but took a low-key approach toward the news media and shared little personal information with the public.

Li was born into a high-ranking military family in 1959 in Chengdu. Raised on a military compound, he was strong and competitive from an early age.

Li loved to read and returned to school in his 40s, earning a master’s degree in management at Sichuan University’s business management school in 2005. Two years later, he received an advanced degree from Hong Kong Polytechnic University.

Influenced by his father, Li grew up with a military disposition. He earned a reputation as a brave, loyal yet domineering company boss. Some at China Mobile liked his personality, others did not.

“Li had a rare talent as a field commander, one that I have hardly seen within the China Mobile system,” a company source said. “He had strong leadership ability, and was pragmatic and competent.”

Mid-level cadres whom Li handpicked for promotions were also often aggressive and sharp-witted – and did not fit the standard, cautious mold of a state-owned enterprise executive.

Li loves traveling, photography and fine wines. He’s known for a high alcohol tolerance and would drive a black Volkswagen Phaeton between work and his family’s luxury villa in Chengdu, which he apparently could afford thanks to what some said was an annual salary of around 2 million yuan.

Workmates called Li bossy, saying he was never satisfied with income levels from ordinary projects. “He wasn’t short of money, nor was he a greedy person. He handled matters justly, believing that if he could help you he would, and if he was unable to help he would say so,” a source said. “It wasn’t about how much money could be made, but rather whether he thought you were the right person, or whether or not he liked you.”

Li served in the army before retiring from the military in the early 1990s. He took a job at the Neijiang post office and was later transferred to a provincial post office management department, where he was appointed director.

Li later joined the newly formed Mobile Communications Bureau, which divided government and enterprise functions and established China Telecom Corp. An internal mobile communications department was created, and Li was hired to serve as director.

By the late 1990s, national telecom industry reform led to the separation of China Telecom’s mobile business operations. China Mobile’s Sichuan division was established in 1999, and Li was appointed to his current position as general manager.

Li was restless at China Mobile yet repeatedly fended off transfer orders to cities such as Shanghai and Guangzhou. Instead, he waited for a call to Beijing.

While waiting, he became a provincial magnate and held his Sichuan post longer than anyone in similar positions. Ordinarily, China Mobile transfers high-level executives every four to six years.

While avoiding transfers, Li also dodged several controversies during his tenure. Many thought he would always successfully survive hints or even accusations of misconduct.

But because of an outspoken and domineering personality “the investigation of Li Hua was both expected and unexpected,” a China Mobile source told Caixin. Many at the company thought he would “get in trouble sooner or later.”

1 yuan = 14 U.S. cents

Shutdown for a Gatekeeper of Telecom Gold [July 30, 2010] (emphasis is mine)

Connections, ‘consulting’ and art collecting helped telecom insider Zhang Rui play a profitable game before authorities moved in

Equipment and IT services that sell for hundreds of billions of yuan, advertising contracts worth billions of yuan, and huge piles of cash for value-added services and special projects: It’s all in a pot of gold at the end of China’s telecom rainbow.

Many have found the gold, from multinational equipment manufacturers such as Siemens and Ericsson to small construction companies that build infrastructure for the nation’s state-owned telecom empire.

But access to this glistening pot is restricted; only a limited number of executives at giant telecom companies, like leprechauns, know the secret way.

One of the gold gate-keepers was businessman Zhang Rui(张锐), according to investigators who have spent several months tracing corruption in China’s telecom industry. Zhang was a key industry insider who apparently helped suppliers and contractors find those gold nuggets, while pocketing quite a few for himself.

Zhang moved freely through the executive suites of China’s telecom world, giving advice to operator chiefs who called him an “industry sage” and quietly cutting deals for contractors in ways that earned him the nickname “invisible man.” Only executives at the industry’s highest echelons knew his name and his game.

Beijing art lovers, however, best knew Zhang Rui as the owner of a swank restaurant on the city’s near-east side and a collector of contemporary art.

He might have held on to his art-lover front while continuing to run his advisory business Beijing Ruizhi Telecommunications Consulting Co. Ltd. behind the scenes if not for an investigation that exposed a corruption trail leading to his desk.

The first step on the trail, numerous sources close to China Mobile told Caixin, was the sudden dismissal and detention of China Mobile Group’s former party secretary and vice president Zhang Chunjiang(张春江) in 2009. Authorities tied him to bribes worth more than 10 million yuan.

A pair of China Mobile leaders were the next to fall: the president of Sichuan Mobile, Li Hua(李华), who has been detained since June; and the president of both Sichuan Mobile’s data department and China Mobile’s wireless music operations, Li Xiangdong(李向东), who fled China earlier this year with an unknown amount of money.

Zhang and his wife, Raynetwork Advertising Co. President Yang Ruining, were recently detained by authoritieson charges that remain unclear.

In the wake of the investigations, China Mobile has launched a major personnel shuffle involving several subsidiaries. And according to a telecom industry veteran, Zhang’s trouble led to an exodus of Chinese executives working for several multinational telecom suppliers. They apparently left the country to avoid trouble.

The snowballing affairreflected the breadth and depth of the telecom industry’s spending habits, and the enormous incentive for contractors to do whatever may be needed to find that pot of gold.

“I never imagined that telecom server-room air conditioning systems and alarm systems could be so lucrative,” said one equipment supplier. “But telecom company fixed asset investment is really big, and even a small portion from the cup is still a lot.”

‘Consulting’ Fees

Opposite Workers Stadium in Beijing is a peculiar building that combines a modern steel structure with ancient ornamentation. It’s said this is a 200-year-old house that was moved from Jiangxi Province and is now the home of Le Quai, an upscale restaurant owned by Zhang.

Local officials, foreign diplomats and celebrities alike feel at home here. Over the years, Zhang has hosted a slew of high-profile events revolving around his reputation as an art collector. Some say his home is a veritable Guggenheim Museum, with nearly 1,000 works of art.

Few art fans know, however, that Zhang made his fortune in the telecom business. He got a start in Dalian in the 1990s as a representative for switchboard makers and eventually built an empire through firms offering “consultant” services to foreign companies seeking business with state-owned telecoms, advertising deals and mobile phone services.

In Dalian, he met his rainmaker and future government-business insider Zhang Chunjiang, then-deputy director of the Dalian Post and Telecommunications Administration, who later became, among other things, the youngest vice minister ever when the Ministry of Information Industries was formed in December 1999.

Zhang kept good relations with this rising star through a period of rapid growth for the nation’s telecom industry.

Since 1992, the number of fixed-line subscribers in China has increased to 1.1 billion from 10 million, while the number of mobile subscribers grew to 800 million from almost zero. Regulators and telecom operators have had to expand networks quickly and on a massive scale. Paying for all this growth required a pot of gold that equipment and service providers were eager to tap, creating enormous opportunities for insiders such as Zhang.

Foreign telecom equipment manufacturers that joined local suppliers lining up for contracts soon learned about the importance of relationships in the Chinese business world. But foreigners who found themselves caught between overseas regulatory constraints and the need to cultivate relationships signed up with Chinese agents and consultants who acted as middlemen.

Zhang signed up numerous telecom equipment and software companies who hired him as a consultant. In fact, though, authorities say he functioned as a third-party representative by transferring payments from contractors to telecom company insiders. He called the payments “consulting fees.”

What Zhang did is common in the industry, insiders say, especially when foreign companies are involved. Middlemen often enjoy close ties to telecom executives and government officials.

Zhang was “a middleman for many foreign companies,” a close associate said.

Gold Rush

Yet Zhang was more than a middleman. As his friend Zhang Chunjiang climbed his career ladder, Zhang expanded his business scope.

Zhang established Beijing Huamai Electronic Technology Co. Ltd. with registered capital of 2 million yuan in July 1995. His wife Yang Xuxia (who later changed her name to Yang Ruining) put up 800,000 yuan, and Zhang and Zhang Chunjiang’s now ex-wife Ji Rong each put up 600,000 yuan.

This became a foundation for Zhang’s other platforms, such as a company with a Hong Kong connection that made alarm systems for clients including China Telecom, China Mobile and China Unicom. But mainly these entities built relationships and shuffled documents; Caixin found only a few employees recently working at the alarm company’s office in Beijing.

Zhang established his first telecom company – Beijing Siruide Computer System Integration Co. – in 1997 and became its legal representative. The company handled computer communication network technology and project integration, but also sold telecom equipment. Huamai Electronic was a shareholder. Others were Sichuan Galaxy Technology Co. Ltd. and Sichuan businessman Li Xinze.

Apparently, one of Zhang’s first business ties to Sichuan was Li, who later worked up to Sichuan Mobile value-added and data services posts, and became a core member of the mobile phone music services provider Sichuan Mobile Music Base.

Zhang established Beijing Ruizhi in 1998, offering communications products as well as computer software and hardware. In 2001, the company invested in another outfit called Raynetwork.

Raynetwork was valuable because it held a telecommunications business license. Such a license requires approvals from multiple government departments and applications are tightly controlled by the government. Zhang sold it in 2007 for 7.2 million yuan.

These and other deals underscored the advantages Zhang enjoyed thanks to Zhang Chunjiang, who became director of MII’s Telecommunications Management Office in 1998, and other friends in high places.

Advertising Whiz

Advertising profit potential caught Zhang’s eye in 2001 after China’s telecom sector had completed its first reform step, which separated companies from government administrations. Telecom operators began to spend more money on image promotion, for example, and so Zhang and his wife set up Beijing Raynet Advertising.

In the first year, the ad company’s sales topped 14.7 million yuan thanks to big clients such as China Mobile and Sanyo. By 2002, revenues had soared to 56.4 million yuan.

The agency won a national contract from China Netcom in 2004, the year after Zhang Chunjiang took a job as Netcom’s president.
By 2007, Raynet had expanded its client base to provincial departments of telecom operators in Shanghai, Liaoning, Changchun, and other regions. Money poured in.

“After getting the Netcom project, we basically didn’t need to do ads for other telecom companies,” a Raynet executive told Caixin.

“A single provincial telecom can support a large advertising company, which can live well,” said a former provincial director of a mobile advertising agency.

A senior advertising source said it’s not uncommon for telecom executives to invest in advertising and advertising production companies, some of which can be half-owned by a telecom company chief or his family. Because production companies have no equity links to advertising companies, it’s difficult to trace the ownership links. They are also less risky than under-the-table gift-giving.
“Everyone avoids directly giving ‘red envelopes’ (cash payoffs),” said one industry insider. “Travel packages, Louis Vuitton bags, jewelry, etc., are too low brow.”

Raynet’s performance opened a door to cooperation with the global ad giant Ogilvy & Mather. The companies established a joint venture in 2007, with Zhang’s wife serving as legal representative.

Sichuan Trio

Another moneymaking venture for Zhang started in 2003, when he and Li each put up 250,000 yuan to establish We Think, a telecom technology company based in Sichuan. Its downtown Chengdu headquarters opened two years later.

The plan was to grab some of the gold available in value-added services (VAS), which had become the fastest-growing sector for the country’s major telecom operators. A rapid increase in mobile phone and Internet users gave birth to an army of VAS providers.

First came text message services, and then mobile music services through places such as China Mobile’s Mobile Music Base in Sichuan. Again, revenues surged.

China Mobile elevated the successful Sichuan Mobile’s music business, giving it oversight of the company’s nationwide music business. Numerous wireless VAS providers like We Think sprang up, and a Caixin survey found several names appeared frequently in the list of these companies’ shareholders: Zhang, Li and Tan Chunling.

Sichuan Mobile became We Think’s largest customer, but the Zhang-Li venture also did plenty of business with Sichuan Telecom.

We Think increased its capitalization to 5 million yuan in October 2004, with Zhang and Li increasing their share of the capitalization to 2.25 million yuan each through non-patented technology. The phrase “non-patented technology” refers to a mobile operator data service analysis system developed by the pair called Comprehensive Evaluation System for the Operational Strength of Mobile Operators.

Zhang and Li’s said the system’s sales revenues would rise to 6 million yuan the first year, 12 million yuan the second, and then climb to 20 million yuan, 26 million yuan and 30 million yuan respectively over the following three years. This forecast allowed them to assess intangible assets of their technology at 4.51 million yuan.

Similar technology assessments-for-investments are described in documents at other companies run by Zhang.

Service and content providers who wanted business on China Mobile’s network platform had to go through the Sichuan Mobile Data Department and Mobile Music Base. We Think waltzed through the door through Zhang’s connections at Sichuan Mobile.

Annual operating revenue rose to tens of millions of yuan by 2005, and in 2007 We Think reported 72.4 million yuan in revenue and net income totaling 27.1 million yuan.

These days, We Think has lost its sheen. Unpaid bills were found recently taped to the company’s Beijing office gate, which is shut tight. Caixin noticed Zhang’s name on one bill.

Another company registered at the address of We Think’s Sichuan branch – Sichuan Heze Technology Co. Ltd. – is in the business of communications equipment consulting and equipment sales. Established in 2004, investors included Zhang, Li and Tan.

Tan was originally a director at Sichuan Television. He later opened an advertising company whose major clients were Sichuan Mobile and other telecom operators. Li and he were the shareholders.

Tan’s main gig was an independent digital music support platform company for the Sichuan Mobile Music Base called Myoo Music Entertainment. He started it in 2005 and, with Li, bought the company in 2007 just as Sichuan Mobile Music Base was starting to provide mobile music services.

Myoo is currently near to launching an initial public offering on China’s Growth Enterprise Market. It’s already completed two rounds of fund-raising.

Wang Feng, an executive at Bond Advertising, said he invested more than 10 million yuan in Myoo. But the recent shakeup in the telecom world, the detention of Zhang, and the exposures of shady business ties linking Tan, Li and others has left him feeling uneasy about the investment.

Wang has good reason to be nervous. It appears the listing plan of Sichuan Mobile Music Base’s most important service provider Myoo now hinges on the outcome of the cases against Zhang and the rest of the telecom insiders who found a way to the pot at the end of the rainbow.

1 yuan = 14 U.S. cents

China’s Bad Signal for Mobile Phone Investors [May 26, 2011]

Myoo, Ultrapower and NetQin won investor hearts and then broke them by relying on China Mobile’s monopoly

Some 18 months after putting 10 million yuan on what appeared to be a sure bet, Chinese media investor Wang Feng is coming to terms with a disturbing truth.

“We still cannot get our money back,” lamented Wang, chairman of Bond Global International Media Advertising (Beijing) Co., in a recent interview with Caixin. “The assets of Myoo Music Entertainment Co. are all frozen, and there’s nothing we can do.”

Nothing, that is, except painfully watch China’s largest mobile phone operator China Mobile seal Myoo’s coffin in the wake of an executive corruption scandal.

Moreover, Caixin learned from sources close to China Mobile’s Sichuan Province subsidiary, Wang is now standing by helplessly as the telecom giant switches its music content business to a new provider named China Straits Global.

China Straits replaced Myoo in late April as China Mobile’s official and sole provider of music, hollowing out Wang’s investment.

The demise of Chengdu-based Myoo was dramatic and unexpected. The company looked good when it launched a start-up fund-raiser in 2009, attracting Wang and others with a promise to corner the mobile phone-wireless music market through an exclusive deal with China Mobile. It planned to launch an initial public offering in 2010, giving foundation investors a chance to cash in their chips.

Persons close to Myoo told Caixin the company booked 80 million yuan in revenues and 50 million yuan in profits for the first nine months of 2009. Revenues and profits were forecast to rise to 100 million and 60 million yuan, respectively, for 2010.

The dream started falling apart in mid-2010, however, shortly after Li Hua, former general manager of manager of China Mobile’s Sichuan branch, was placed under investigation for alleged financial misconduct. That move followed the disappearance in March of Li Xiangdong, then the general manager of China Mobile’s Sichuan Mobile Wireless Music Base, who apparently fled the country with a sizeable amount of money and is currently at large.

The investment in Myoo was a fraction of the large amount of private money that’s been rushing into the telecom industry in China in recent years. Even today the players keep coming, despite the industry’s status as a state-owned sector monopolized by state companies such as China Mobile.

Neither the Myoo investment debacle nor business troubles now facing China Mobile contractors Ultrapower and NetQin curtailed investor interest in telecom businesses. But these cases are now serving as a wake-up call for players such as Wang, and a reminder that business foundations can be fragile for second-tier telecom service providers in China.

By teaming up with a state monopoly and massaging official connections, a private telecom service provider initially may find it easy to overcome technical and policy barriers for doing business. But success often hinges on orders from companies at the mercy of ever-changing government policies and subject to fallout when management troubles, such as a corruption case involving a high-ranking executive, bubble to the surface.

Death by Scandal

The troubles in Sichuan followed the late 2009 sacking of Zhang Chunjiang, China Mobile’s vice chairman, who had been placed under investigation for alleged corruption.

These high-profile corruption cases at China Mobile laid the groundwork for Li Yue’s appointment as China Mobile CEO last August and a broad reshuffling among executives at provincial branches. Li Yue’s predecessor Wang Jianzhou gave up the CEO job but retained his post as company chairman.

Li Yue adopted a strong stance with promises to reform business models of the company’s value-added services. These measures are designed to restructure internal and external interests. But the process has threatened a large number of “related parties” – sometimes called “parasites” – that cannot live without China Mobile.

Just a few months before the Sichuan executive scandal broke, Wang decided to put his money on Myoo. He made the decision after reading an investment report issued by CITIC Securities, whose direct investment arm Gold Stone Investment Ltd. had also joined in financing Myoo.

In December 2009, Myoo hired a broker, accountants and a legal team to help steer the company toward a listing on the Shenzhen exchange’s high-tech start-up board ChiNext by 2010.

Myoo’s equity capital started at 1 million yuan and quickly swelled to 46 million yuan after two financing rounds. The company attracted support from more than 20 individual and four institutional investors.

Some investors, such as Wang, were lured by Myoo’s growth prospects outlined in the CITIC report and impressive financials. Others had various inside connections to the new company.

Sources close to Myoo Chairman Tan Chunling said more than 10 players in the first round claimed special connections with the company and even “deep government” ties.

Myoo had fewer than 70 people on its payroll but an exclusive contract to support China Mobile’s Sichuan-based wireless music base, which generates tens of billions of yuan in revenue every year.

Moreover, the company had a monopoly. Like other well-connected service providers in China’s state-dominated sector, it enjoyed an exclusive sales channel and stable cash flow. Plus, its growth potential seemed immense.

One source said the investor group included some Myoo backers whose unique connections or official backgrounds offered the company special advantages.
After the corruption probe started, however, Myoo lost its contract with China Mobile. Sources close to Sichuan Mobile said Myoo’s Tan visited Beijing in July 2010 in hopes of salvaging the deal with China Mobile.

But Tan was unsuccessful. And he was later implicated after telling police he gave Li access to a 2 million yuan bank account. He later discovered that the balance had ballooned to 20 million yuan. Myoo’s accounts were subsequently frozen by authorities.

Risky Business

The dangers inherent for investors in monopoly-related service providers such as Myoo are also evident in the recent histories of China Mobile contractors Beijing Ultrapower Software and NetQin Mobile Inc.

Ultrapower and NetQin were both successfully listed. Both companies are now on the rocks, along with their start-up investors.

Ultrapower operates China’s Mobile’s Fetion instant messaging service, which links mobile phones and computers on the Internet. It’s almost exclusively dependant on the telecom giant.

Ultrapower’s foundation investors included CITIC Securities’ Gold Stone and venture capital firm Huijin Lifang Capital Investment Co., which bought respective 2.2 percent and 2.8 percent stakes five months before the 2009 IPO. They paid only 20 percent of the IPO launch price of 58 yuan a share.

Just before the listing, China Mobile extended its contract with Ultrapower to three years, encouraging investors. And within four months of going to the stock market, Ultrapower’s share price surged 500 percent.

Then came the corruption scandal and China Mobile’s decision to reorganize value-added services. In connection with the ongoing overhaul, the company may decide to let its Fetion contract with Ultrapower run out when the current deal expires in November.

Ultrapower’s future is now uncertain, since it does not own the Fetion brand nor the intellectual property rights. Investment funds have been pulling out of Ultrapower since the first quarter, and its share price has declined nearly 20 percent so far this year.

NetQin is also heavily reliant on China Mobile, having signed a contract in 2010 to provide security scanning and authentication for all software, games and files uploaded to China Mobile’s application store.

Caixin found that while NetQin’s prospectus says most revenue comes from mobile carriers and value-added service providers, including China Mobile and Tianjin Yidatong Technology Development Co. But China Mobile is by far the biggest moneymaker.

Yidatong accounted for 52.7 percent of NetQin’s net revenues in 2008, but that portion shrank to no more than 21 percent in 2009 and 2010. In fact, 9-year-old Yidatong merely functions as a bridge between China Mobile and NetQin.

But investors loved NetQin and participated in four rounds of financing between 2007 and 2010. Sequoia Capital and GSR Ventures jointly invested US$ 3 million in June 2007. Ceyuan Ventures and Fidelity Asia Venture added undisclosed amounts in October 2007, while GSR and Ceyuan invested a combined US$ 20 million in April 2010. NetQin increased its stock in November 2010, attracting Taiwanese mobile phone maker HTC Corp., which invested US$ 2.5 million, and Gaintech, a subsidiary of Taiwanese chip maker MediaTek, which provided US$ 2.2 million.

Investors knew all about NetQin’s inside connections. The company made no secret of its being favored by “leaders” and “revolutionary predecessors.”

A NetQin press release last November announced a company visit by General Zhou Erjun, a nephew of the late premier Zhou Enlai and former political department director at the National Defense University. The company called itself “a revolutionary offspring” and “a new generation of technology worker that grew up under the red flag.”

NetQin’s walls started collapsing March 15, a day before the company planned to submit its IPO application, when the official China Central Television (CCTV) reported that the company was forcing consumers to use its software. The report labeled company products “rogue software.” And according to the report, consumers were being forced to pay service charges through Yidatong.

After the CCTV story appeared, China Mobile temporarily suspended its business with NetQin, but it did not penalize Yidatong.

NetQin then submitted its New York Stock Exchange IPO application to the U.S. Securities and Exchange Commission (SEC) as planned but lowered its asking price, scaling back the fund-raiser to US$ 75 million from US$ 100 million.

NetQin expanded its SEC report April 9 to cite risks tied to the CCTV exposure, adding that the company should reduce its reliance on mobile carriers such as China Mobile.

On launch day May 5, NetQin’s share value fell 19 percent from the initial asking price, exposing another dimension to the risks inherent among China Mobile’s contractors and across the board for monopoly sectors in China.

China Mobile names new manager [May 31, 2010]

China’s biggest mobile carrier China Mobile announced Monday that Wang Jianzhou, the current general manager of China Mobile has been nominated chairman of the firm, and Li Yue, the deputy manager of the company will be appointed as the general manager of the corporation.

Wang used to be the deputy secretary of CPC leadership group of China Mobile.

At the request of the State Assets Supervision and Administration Commission (SASAC), the firm will set up a board of directors with a chairman and general managers.

Wang said that the firm has made great achievements in the past years, but faces many challenges ahead. Li stated that the development of the internet would bring new opportunities for the firm and it will strive for more.

Ericsson Employee Probed for China Mobile Scandal [Nov 18, 2010] (emphasis is mine)

The probe is related to corruption charges surrounding two high-ranking executives from China Mobile over telecom equipment procurement

(Beijing) – An equipment procurement officer from Ericsson, the international mobile equipment supplier, was brought in for questioning to assist in the investigation of the ongoing China Mobile scandal in Southern China.

The investigation is related to corruption charges surrounding two high-ranking executives of China Mobile’s Sichuan branches who stand accused of accepting bribes in exchange for equipment deals. Li Hua, the general manager of China Mobile’s Sichuan branch, and Chen Binglan, the deputy general manager of China Mobile’s Sichuan branch responsible for equipment and project procurement, have been placed under custody of the party’s disciplinary agency.

Caixin learned from sources close to the situation that just after the corruption case of Li was exposed, the focus of investigation has since moved to Chen.

China’s telecom industry has seen a huge expansion of networks in recent years and equipment procurement deals have become a hotbed for corruption. Since the 1990s, fixed line telephone subscribers have increased from 10 million to 1.1 billion, and mobile phone subscribers grew to 800 million from zero. The huge volumes involved in telecom equipment purchases and related services have become an important source for global equipment suppliers to grow their profits.

Equipment suppliers from different countries have employed strikingly creative tactics to grab a bigger share of the pie.

Previously, the corruption case of Shi Wanzhong, former chairman of China Mobile’s Anhui branch, this year brought to light the involvement of Siemens Telecommunication. (See Century Weekly’s cover story of “Shutdown for a Gatekeeper of Telecom Gold” in the 30th issue for details. http://english.caing.com/2010-07-30/100165466.html)

Another person detained for investigation by related authorities was Shen Changfu, the Party chief, chairman and general manager of China Mobile’s Chongqing branch, for his dealings in equipment procurement from foreign suppliers, including Ericsson.

Similar to the career path of Li Hua in the telecom sector, Shen Changfu was formerly the director of Chongqing Telecom Administration, and later in charge of China Mobile’s Chongqing branch when the company was founded along with reforms in the telecom sector.

Both Sichuan and Chongqing are important regions for Ericsson’s presence in China. In 2004, Ericsson established its Western China headquarters in Chengdu. Ericsson had four regional units in China at the time: the Northern region, the Southern region, the Central regions and the newly-established Western region. The Western region of Ericsson China covers markets in Sichuan, Chongqing, Yunnan, Guizhou and Tibet. The company has on several occasions reiterated Ericsson’s strategic development in Sichuan, saying that it is one of the most vigorous telecom markets in China. The company is counting on the central government’s active support of infrastructure development in Western regions for greater demand in telecoms platform building.

Chongqing is yet another important base for Ericsson. Founded in 1998, Chongqing Ericsson Technology Co., Ltd. is the sole subsidiary of Ericsson in Western China, providing professional telecom services, primarily responsible for the delivery of telecom services and technical training to operator customers of Ericsson in China’s Southwestern areas. In 2006, a center for supply, procurement and telecom services was opened by the subsidiary in Chongqing, offering procurement, integration and backup services to Ericsson China and its global products.

Although Ericsson has remained the No. 1 telecom equipment provider in the global market for quite some time, its performance has disappointed many this year. As revealed in its third quarter financial report in October, net sales were SEK 47.5 billion, up 2 percent year-on-year but down 1 percent from quarter-on-quarter. In the first nine months of this year, Ericsson reported total sales of SEK 140.6 billion, down 5 percent year-on-year, and an operating income of SEK 16.1 billion, down 6 percent year-on-year. Its profit margin this quarter was 39 percent, up three percent year-on-year.

In contrast to the fast growth of Chinese equipment manufacturers such as Huawei and ZTE, Ericsson, as one of the global telecom giants entering the market of China at an early stage, has been relegated to daily diminishing market presence in China. Ericsson ranked next to last place among all the suppliers in terms of successful bidding during the fourth round of TD-SCDMA bidding this year.

Former Telecom Executive to Face Charges [Jan 7, 2011] (emphasis is mine)

China Mobile’s former deputy manager and party secretary will be handed over to judicial authorities now that the almost year-long party disciplinary investigation has been completed

(Beijing) — A former executive of China’s largest telecom operator, China Mobile, may face official charges after the completion of a Communist Party investigation, according to Gan Yisheng, deputy secretary of the Central Commission Discipline Inspection (CCDI).

The case of Zhang Chujiang, China Mobile’s former deputy manager and party secretary, has been handed to the country’s judicial system by the party’s disciplinary agency to be formally charged, said Gan.

Caixin learned that a provincial prosecutor in Northern China will process Zhang’s case of alleged corruption.

The Party investigation into 52-year old Zhang’s dealings at China Mobile was launched in December 2009. On September 10, 2010, Zhang was expelled from his position and the Communist Party of China.

Zhang has spent most of his career in the telecom industry at China Mobile and China Netcom. In addition, he has worked for the central government and at one point held the position of vice minister at the Ministry of Industry and Information Technology.

After the Party investigation opened into Zhang early last year, several other officials at China Mobile’s Sichuan branch were implicated in similar allegations of official wrongdoing. Li Hua, president of Sichuan Mobile and Li Xiangdong, head of China Mobile’s wireless music operations, as well as a procurement officer from global mobile equipment provider Ericsson was also found to be involved in the crimes.

Sources familiar with the situation told Caixin that the investigation headed by the CCDI has come to a close.

Chief Engineer of MIIT Under Probe [March 24, 2011]

An industry insider said the case may be linked to the China Mobile corruption scandal

(Beijing) — Su Jinsheng, chief engineer of the Ministry of Industry and Information Technology (MIIT), is under investigation on alleged disciplinary violations, Caixin has learned from sources close to the situation.

A source familiar with the matter said Su had been absent from work since he was taken away for questioning by disciplinary authorities.

The exact cause of his detention has yet to be revealed. An industry observer said Su is suspected of involvement in China Mobile’s corruption scandal, currently under investigation by the Communist Party’s disciplinary agency.

An initial probe into China Mobile brought down a group of China Mobile’s high-level officials on corruption charges last year, including Li Hua, the general manager of China Mobile’s Sichuan branch, and Chen Binglan, the deputy general manager of China Mobile’s Sichuan branch. The investigation has yet to be concluded.

Su was named the chief engineer of MIIT in April 2009. He was also the director of MIIT’s Telecommunication Management Bureau, and the director general of the Telecommunications Administration Bureau of the Ministry of Information Technology. In June 1999, he was appointed temporary Communist Party secretary and the head of a working team in charge of preparation work for establishing the China Mobile Communications Corporation.

Su made his last public appearance on March 16 when he attended an industry conference in Beijing.

Wrong Key Fumble for China Mobile in Pakistan [May 23, 2011]

Last place among Pakistani carriers was not what China Mobile expected when it started a global expansion

Ramble around Islamabad and you’ll find the word Zong plastered on walls everywhere, and prominently displayed on signboards near the city’s most popular Chinese restaurants.

But Islamabad’s familiarity with Zong, the brand name for China Mobile Ltd.’s overseas operations, need not be interpreted as a sign of success for the Chinese mobile phone service in this crowded capital city, or anywhere else in Pakistan.

China Mobile has been struggling to build a Pakistani business since buying the domestic carrier Paktel, today known as CMPak and the brand name Zong, in early 2007 – four years after Pakistan opened its telecom market to international competition.

The acquisition marked a proud beginning for the Chinese carrier’s global expansion, which continues today. China Mobile paid US$ 560 million for what was then Pakistan’s fifth-largest mobile operator.

But today, Zong is still in fifth place – at the bottom of the heap among mobile carriers in Pakistan, where the mobile phone penetration rate has stabilized at about 60 percent.

Zong’s user base has increased from less than 1.5 million in 2007 to 6.92 million by the end of 2009, but its major competitors have picked up far more customers, according to the Pakistan Telecom Administration (PTA).

Among the 97.6 million Pakistanis with mobile phones in 2009, PTA says nearly one-third were serviced by Mobilink, a subsidiary of Egypt’s Orascom. The Pakistani subsidiary of Norway’s Telenor counted 22.5 million customers, while Warid Telecom had 18.8 million users and Ufone 18.5 million.

Neither is Zong getting the kinds of revenues enjoyed by its competitors. Among all carriers, PTA says, average revenues per user are about US$ 2.50 per month. But a Zong user generates only an average US$ 1.50 for the Chinese company.

Because Pakistan and China are political allies, Zong’s struggle has been particularly painful for China Mobile, the world’s largest wireless service in terms of subscribers.

“If we cannot succeed in Pakistan, we’d better not go anywhere else” outside China, the company’s Chairman Wang Jianzhou declared after the Paktel acquisition.

Door Knocking

PTA data obtained by Caixin says Pakistan’s mobile phone user coverage rate was only around 8 percent in 2004 and 22 percent the next year. China Mobile bought into the market when the coverage rate had reached 54 percent. The rate continued growing rapidly as the Chinese company settled into its new territory and, in 2008, launched the Zong brand.

By the time Zong arrived, its four competitors had already secured market positions, and the coverage growth rate had slowed considerably.

China Mobile first knocked on Pakistan’s door in 2005, after the Pakistani government offered to sell a 26 percent stake in Ufone, a subsidiary of Pakistan Telecommunication Co., to the highest foreign bidder.

China Mobile was one of 13 international players that participated in the auction, but lost with an offer of US$ 1.4 billion. The winner was Etisalat of the United Arab Emirates, which paid US$ 2.6 billion.

Afterward, Wang said he had no regrets. “Market pressure would have been too great had we offered a price that was too high,” he said.

Nevertheless, Ufone’s strong performance in the following years brought Etisalat satisfactory returns. According to PTA, Ufone’s subscriber list has grown nearly 11-fold since 2004, stabilizing at around 20 million in 2010.

Negotiations with Nasdaq-listed operator Millicom gave China Mobile another opportunity in 2006. The Luxembourg-based company then had about 10 million subscribers in 16 emerging countries in Latin America, Africa and Asia, including Pakistan.

And at the time, Paktel was a Millicom subsidiary – as well as the worst performer in the multinational’s portfolio.

China Mobile hired China International Capital Corp. (CICC), China’s largest investment bank, as a financial advisor to prepare a bid for Millicom in collaboration with Bain Capital, a private equity firm.

The deal was close to signing, a source told Caixin, and Millicom’s market capitalization was around US$ 5.6 billion when CICC suggested China Mobile offer US$ 4 billion. The advisor had valued the Paktel portion of the company at zero.

The Chinese eventually abandoned the Millicom deal due to concerns about political risks in emerging countries and potential management issues. But in the end, China Mobile got Paktel.

More recently, minus Paktel, the market capitalization of Millicom has risen as high as US$ 15 billion.

China Mobile tried to open the Pakistani market door with the same key that worked in China. But the key didn’t fit because each market functions under a different regulatory framework, with a different business environment.

For example, China’s telecom market is monopolized by state-owned China Mobile and two other carriers, while Pakistan’s market is open to price-cutting competition.

A PTA report said the Pakistani mobile industry generated US$ 2.8 billion in total revenues in the 2009-2010 fiscal year, up 11 percent from a year earlier, even though tariffs decreased up to 20 percent.

Pakistan is also one of the few countries that heavily taxes telecom operators. And Pakistani mobile phone subscribers are typically price-oriented, say industry experts, with a habit of chatting on the phone for long periods of time.

Another difference is that mobile phone numbers are freely transferable in Pakistan, allowing customers to switch service providers at will. So if Zong tries to raise prices, its subscribers are likely to leave for another operator with a better tariff.

This business environment means user coverage rates are crucial for operator profits in Pakistan, and so far Zong’s rate has fallen far behind its rivals.

China Mobile tried to win more Pakistani customers by applying a rural market strategy that succeeded in China. It was Wang who had won China Mobile a huge rural customer base starting in 2004 – a move that’s underpinned the company’s high growth rate for years since.

But the strategy failed in Pakistan, partly because rural land needed for telecom bases and equipment is not cheap. Rural property in China, on the other hand, costs far less than urban parcels. In addition, carrier network operations and maintenance have been impeded by weak infrastructure in Pakistan, especially in rural areas.

China Mobile’s lackluster performance in Pakistan can also be attributed to human resources. An investment banker familiar with the company told Caixin that China Mobile executives rejected the advice to retain a Pakistani management team after buying Paktel, and instead dispatched a team of Chinese managers to oversee operations and control critical areas such as human resources and finance.

“The first batch of people sent to Pakistan came from domestic provincial branches of China Mobile,” the banker said. “They did not have good language skills, and therefore encountered serious communication problems.”

China Mobile gradually withdrew its Chinese managerial staff starting in 2009 and switched to a localized approach. The Zong marketing staff, whose job includes overseeing an army of signboards in Islamabad, is now entirely Pakistani.

Another Try for Telecom-Broadcast Reform [March 11, 2011]

Last year’s plan to integrate the nation’s telecom and broadcast operations is dead, but the reform push is still alive

A plan to integrate China’s media networks ground to a halt last year as broadcasters and telecom operators failed to settle their differences.

This year, however, a fresh start may be coming soon as policymakers get involved with new efforts to integrate operations, particularly broadband Internet, through top-down restructuring orders.

Ministry of Industry and Information Technology (MITT) chief Miao Wei recently declared the pilot integration plan will not expand this year, telling legislators at the National People’s Congress and the Chinese People’s Political Consultative Conference sessions that an ambitious project aimed at blending networks had breathed its last.

A source told Caixin that each of 12 cities and provinces involved in the pilot project’s initial stage last year later submitted detailed plans to the central government to push forward the integration. But none received a reply, thus underscoring the government’s interest in trying a fresh approach.

In another signal that the government wants to move forward, Caixin learned MITT recently urged telecom operators to explore possibilities for a new round of restructuring.

That call was followed by a plan floated by telecom operators to break up the nation’s largest mobile phone company, China Mobile, and divide its assets between two telecoms – mobile provider China Unicom and landline giant China Telecom – as well as the nation’s broadcasters.

In a March 7 interview, China Mobile Chairman Wang Jianzhou told Caixin he’s heard the arguments for a new round of telecom reshuffle. But Wang called the idea impractical. And MITT officials denied the existence of a breakup plan.

The nation’s telecoms had strongly opposed an earlier plan to shift some telecom responsibilities to broadcasters floated by the Chinese Academy of Social Sciences. It called for transferring all 100,000 Internet data facilities run by China Telecom and China Unicom – facilities which see annual revenue at about 6 billion yuan – to cable television companies operating under a proposed, new National Broadcasting Television Network Co.

Broadband Battle

This proposed national broadcast company would operate a broadband cable network supervised by the State Administration of Radio Film and Television (SARFT). That’s because to many in broadcasting industry, broadband issues pose the greatest barrier to telecom-broadcast integration.

China Telecom and China Unicom currently dominate China’s Internet services by providing broadband networks, the international access, data centers and content flow.

The government lets broadcasters and telecoms alike operate broadband services, and it’s given broadcasters certain advantages. But only telecoms offer international broadband access and intra-network settlement.?

Broadcasters argue that relaxing the telecoms’ monopoly grip on Internet broadband should be a first step toward network integration.

Under the academy of sciences plan, China Telecom and China Unicom would appraise the values of their data center businesses before breaking them up to hand over to the National Broadcasting Television Network Co.. The proposed network company would be responsible for operating and servicing all content on the Internet and TV in China.

Under the plan, MITT would focuses on regulating telecom operations and competition among the country’s three operators – China Telecom, China Unicom and China Mobile. And the operators would be responsible for building and operating the broadband and Internet access networks.

Meanwhile, SARFT would become responsible for monitoring broadband media content and issuing permits for operating, monitoring and managing the broadband market.

Among those objecting to the plan is Kan Kaili, a professor at Beijing University of Posts and Telecommunications, who argues that network and business operations must be separated in a way that breaks up the monopoly in broadband market. He said any restructuring that creates a larger company with a vertically integrated monopoly would make a bad situation even worse.

Yang Peifang, a telecom expert from the MITT, also opposes the academy’s plan. He said broadband woes are mainly a business problem that would not be resolved through a new administrative monopoly. Yang said service businesses should be developed to encourage orderly competition and make the communications market more profitable.

The central government has long supported giving SARFT responsibility for an integrated broadcast-telecom platform, but telecoms consistently objected.

Luo Mingwei, an official with China Telecom’s Department of Regulatory Affairs, recently wrote in an article for the industry publication People’s Posts and Telecommunications News that the plan to “centralize broadcast and control rights under the broadcasting sector” triggered concerns among network operators. These concerns centered on “whether market operation and industry development is moving toward the market, or rather toward a model integrating politics and business,” he wrote.

Luo’s article underscored the argument that any telecom-broadcast reform will require clearly separating politics and business, and building an industry regulation model that satisfies market needs as well as supports national security.

Yang told Caixin a current priority should be to build and coordinate a regulatory body that oversees broadcasting and telecom management. The next reform moves should create “a complex system that cannot be simplified,” he said.

“It’s hoped that this reform can follow more technological and economic principles, and refer more often to opinions from industry experts,” Yang said.

China Mobile, SPDB Join Hands in Mobile Payment [Nov 26, 2010]

The size of the mobile payment market in 2010 will reach 2.84 billion yuan, while customers are expected to hit 150 million

(Beijing) — Shanghai Pudong Development Bank (SPDB) and China Mobile Ltd. announced a strategic partnership on November 25 in which the two will jointly develop financial services through mobile phones.

According to Wang Jianzhou, chairman of China Mobile, the mobile carrier’s equity investment in SPDB was completed in October. China Mobile now holds a 20 percent stake in SPDB.

Xue Jianhua, general manager of SPDB’s electronics department, said that the biggest obstacle for China’s electronic payment services market is the lack of technological and regulatory standards. Backed by the partnership, the two will try to push forward a national standard for mobile payments for mainstream use.

According to Xue, China Mobile and SPDB will launch new products or services under the partnership as early as the second quarter next year.

In 2009, China’s mobile payment market was valued at 1.97 billion yuan with 82.5 million customers. According to consulting group iResearch, the size of the mobile payment market in 2010 will reach 2.84 billion yuan, while customers are expected to hit 150 million.

Xue said that the two will also jointly explore more business cooperation opportunities related to ATM machines and other payment terminals.

How Jack Ma’s Mistake Damaged China’s Market [June 14, 2011]

By secretly transferring Alipay, the Alibaba founder violated contract rights that China should reinforce

Business contract principles and property rights together form a basic cornerstone of the market economy. But contract violations can crack the cornerstone and undermine an entire market structure.

Few people ever thought China’s Jack Ma, the highly successful Internet entrepreneur who frequents international events speaking fluent English, would ever secretly transfer the online payment service Alipay, a core asset of Chinese-foreign joint venture Alibaba Group, to a private firm he controls.

But Ma and his management team, an Alibaba minority shareholder, did indeed transfer Alipay starting in June 2009 and closed the deal in August 2010. A low price was paid, and the process went unreported until recently.

In the face of this outcome, Alibaba’s foreign stakeholders Yahoo and Softbank have two options: They can sit down at the negotiation table with Ma and work out a compensation package, or they can pursue a legal course by suing Ma and his management for maliciously infringing on shareholder interests, and hopefully bring Alipay back to the Alibaba fold.

Yahoo and Softbank together control 70 percent of Alibaba. Currently, Yahoo wants to bargain for compensation while Softbank has refused to talk with Ma, leaving room for maneuvering.

No one knows what will happen next, but public opinion has already rendered judgment. We agree with the majority who say Ma is wrong. He made a mistake by violating contract principles that support the market economy, and his error is having dire consequences.

Ma founded Alibaba and took most of the credit for Alipay’s commercial success. He has every reason to be fully committed to and concerned about the company’s future outlook. And he is well qualified to benefit from Alibaba’s growth.

However, by acting without the consent of Alibaba’s leading shareholders, Ma was presumptuous to transfer the company’s core asset to a concern under his name, for a price too low to be fair. He seriously violated a contract between Alibaba’s shareholders, and the contract between shareholders and management.

Yahoo and Softbank lost a valuable asset. Yahoo’s share price slumped as a result, and now the company faces a class-action lawsuit filed by U.S. shareholders. Unless there was some other kind of agreement that hasn’t been revealed, also seriously damaged were the interests of other members of the managerial staff with stakes in Alibaba.

The ostensible beneficiaries of the transfer were Ma and another Alibaba founding member, Xie Shihuang. Ma owns 80 percent and Xie 20 percent of the private firm that took over Alipay.

Even if Yahoo, Softbank and Ma work out a compensation agreement that’s approved by Alibaba’s board of directors, a basic fact cannot be denied: Management led by Ma took unilateral action and violated a basic principle of commercial society by failing to abide by a contract.

A contract requires credibility and integrity. A violation leads to imbalance and weakens an enterprise. So Ma is paying a heavy price: The international business reputation that he has been building for years has been tarnished, and prospects for Alibaba’s long-term growth have been diminished.

The damage does do not stop there. In economic terms, the move points to a great “negative externality.” If contracts are not respected, an entire society could face an increase in commercial risk that unnecessarily drives up business costs.

Honoring contracts is often a weakness for Chinese companies. It’s not uncommon for insiders to re-appropriate assets. But this old black eye becomes even more pronounced when it involves someone like Ma, an internationally respected figure who’s seen as a representative of Chinese entrepreneurship and, as the Alibaba chief, a success story China can be proud of.

The Alipay transfer at a discount likewise delivered a direct blow to overseas investor confidence in Chinese companies, sapping their trust. That may explain why many who once loved Ma and pinned their hopes on him now feel so much regret.

Of course, Ma’s mistake is not simply a matter of personal integrity. He is an entrepreneur with good credit, as his track record proves. And one reason why he went against contract principles on the Alipay issue is connected to the hesitancy of regulators at the People’s Bank of China.

The central bank for years delayed a regulatory decision on licensing third-party payments businesses such as Alipay. The vague process reflected a less-than-open-minded attitude toward foreign investors in third-party payment operations.

The central bank started soliciting opinions on proposed rules for third-party payment systems back in 2005. In the regulations finally enacted in June 2010, the central bank said foreign-funded third-party operators would have to follow special rules to access the Chinese market and would need State Council approval.

Yet at this point, China can and should open its third-party payment services to foreign investors. It’s unnecessarily complicated to make Chinese and foreign companies follow different sets of rules. So it is regretful that the Alipay transfer by Ma was not only an unwise move but motivated by unwise policy.

Contract fulfillment hinges on a complete institutional arrangement. The planned economy unfortunately disrupted China’s long-standing commercial traditions. Even today, we are still traveling a long, arduous road to build a market economy. In the next stretch, we should create a system in which independent mediators, arbitrators or a judicial force can be summoned to settle contract disputes. Such a legal system is needed to support the market economy. Currently, if Softbank or Yahoo sue Ma in China, the impartiality of Chinese judicial officials would be tested.

The Jack Ma success story is perhaps more famous in today’s China than the original Arabian Nights story of Alibaba. We hope that eventually Ma’s tale has a happy ending. We also hope to see more wealth stories for Chinese companies.

But this is no fairytale scene. There is a real need to uphold the spirit of contractual agreements with honor and integrity, and thus reinforce a solid market economy in China. Reaching this goal has much to do with the future of China’s vibrant commercial system.