Qualcomm to Gain From China Wireless Shift

The Chinese government's reshuffling of the country's wireless carriers will make the nation's telecom industry as competitive as the U.S., and a shift to 3G wireless technology will greatly benefit Qualcomm (QCOM Quote), analysts say.

Over the weekend, Chinese officials announced a plan to merge six state-owned phone providers into three in a move designed to offer more competition for China Mobile (CHL Quote), which has the largest subscriber count in the world with nearly 400 million.

Three 3G spectrum licenses will be granted to the merged companies once the restructuring is completed: wideband code division multiple access (WCDMA), time division synchronous code division multiple access (TD-SCDMA), and standard CDMA.

The Chinese government is pushing for China Telecom (CHA Quote) to acquire CDMA licenses from China Unicom (CHU Quote), which will affect roughly 43 million subscribers. China Unicom would then be encouraged to merge with China Netcom (CN Quote), which would build out a 3G network based on WCDMA technology. China Mobile, meanwhile, would be committed to operating a TD-SCDMA network.

American Technology Research analyst Mark McKechnie said he expects China Mobile to face considerable competition from China Telecom if the restructuring goes as Chinese officials plan, and that China Telecom would step up its efforts to upgrade its CDMA network to EV-DO.

This shift, McKechnie says, would create a race in the way Verizon's (VZ Quote) evolution of its wireless network to EV-DO technology has forced followers AT&T (T Quote) and Deutsche Telekom's (DT Quote) T-Mobile to move quickly in order to catch up.

"This will in effect make China more like the U.S. market," said McKechnie in a research note. "In China, we will now have China Telecom taking the role of the 'rabbit' pushing its EV-DO network and forcing new followers China Unicom and China Mobile to move on WCDMA."