Global Telecoms
The great leap forward to 4G in the US and the impact on Asia
The US is poised to take the global lead in 4G mobile with rapid rollout of LTE technology in
prime 700MHz spectrum. We believe LTE is technically superior to WiMAX and the big LTE
push by Verizon and AT&T will snowball into a decisive scale advantage.
These shifts in the US could start a process of global technology de-fragmentation that
re-shapes the pace and direction of Asia’s 4G roadmap.
We believe Asian policymakers, operators and vendors will consider an accelerated transition
to LTE, with Korea the most likely to follow the US lead and China likely to continue down its
own TD-centric path.

Executive summary
The US is moving from laggard to leader in 4G mobile, deploying
LTE in re-farmed 700MHz TV spectrum. US-led global LTE
momentum will influence Asian telecoms interests significantly. As
Asia follows the US’ lead, re-farming TV spectrum for 4G, vendors/
operators will re-orient towards LTE, away from WiMAX/CDMA. We
are negative on WiMAX exposure (KDDI, Sprint), positive on LTE
leaders who can gain share (Verizon, Ericsson), and see a mixed
outlook for China (positive for vendors, negative for operators).

A great leap forward for US 4G
The combination of the recent 700MHz auctions, the aggressive deployment schedule for fourthgeneration
LTE technology by leading operators Verizon and AT&T, and the potential collapse of Sprint
Nextel’s WiMAX strategy, positions the United States at the centre of the global debate over 4G.
In March 2008, the US regulator, the Federal Communications Commission (FCC), closed the longawaited
auction of 700MHz spectrum. The auction raised a record total of USD19.6bn with Verizon and
AT&T dominating the bidding and paying a combined USD16.3bn for spectrum. AT&T began building
its 700MHz spectrum position in November 2007 with the purchase of 12MHz of previously awarded
national 700MHz spectrum from Aloha Partners for USD2.5bn.
Both Verizon and AT&T intend to use their 700MHz spectrum for an aggressive rollout of LTE 4G
mobile technology beginning as early as 2009. The combination of LTE and low 700MHz frequencies,
we believe, will deliver a compelling data advantage for these operators versus domestic rivals, through
the offer of superior data speeds, more extensive network coverage and better in-building reception.
Meanwhile, the outlook for mobile WiMAX in the US is bleak, as Sprint Nextel has delayed its planned
April launch of its ‘Xohm’ WiMAX service, while its brief alliance with independent WiMAX provider
Clearwire has also fallen apart. We believe that for both offensive and defensive reasons, Sprint Nextel
may have to re-direct investment away from WiMAX and towards LTE, which we believe would deal a
major blow to WiMAX’s credibility and prospects worldwide.
The great leap forward by the US to 4G, we believe will establish LTE as the de facto global 4G mobile
standard, with 700MHz a favoured band for deployment. We believe these developments could also
change the orientation of the 4G roadmap in terms of technology, spectrum and industrial policy in Asia.

LTE-WiMAX technical/commercial review
The HSBC global telecoms team has consistently argued that LTE (essentially fourth-generation or ‘4G’
GSM) is a technically and commercially superior technology to WiMAX and will ultimately become the
primary global 4G standard. WiMAX, LTE, and UMB (4G CDMA) are all based on OFDMA and IP
technology and share many similarities.
However, in contrast to WiMAX which is merely a radio network upgrade, LTE is a comprehensive radio and
core network platform. We believe this will translate into lower integration risk and superior service
functionality. In an important technological difference between the two, LTE uses a single-carrier uplink from
the user device to the base station. This means LTE devices should consume less power, offering longer battery
life or permitting use of less expensive battery materials. We believe this distinction ultimately belies the
different design heritages of LTE and WiMAX, with LTE coming from a mobile handset orientation and
WiMAX coming from a laptop computer orientation.
However, the fundamental reason we believe LTE will win the technology war with WiMAX (and UMB)
is economies of scale. Given its growing momentum over the last six months, LTE now enjoys the
commitment of some of the world’s largest telecoms operators and equipment vendors. Put plainly, we
would back the combined financial, technical and competitive might of LTE-backers like Verizon,
AT&T, T-Mobile International, DoCoMo, Ericsson and Nokia over the core WiMAX grouping of Sprint
Nextel, Clearwire, Intel, Motorola and Samsung.
Implications for Asia
The International Telecommunications Union’s recent designation of certain 700MHz frequencies as IMT
(3G/4G) spectrum, combined with aggressive plans by US operators to deploy LTE in this band, could
have significant implications for both wireless operators and equipment vendors in Asia. The US is the
largest wireless market in the world for services and equipment, but has historically lagged developed
Asia on the technology curve. We believe the US leap to 4G could see regional technology rivalries resurface
with Asian leaders like Japan and Korea keen to re-assert parity at least (if not outright
advantage). Korea in particular too has historically sought to align domestic technology policy with the
US roadmap, giving Samsung and LG time to effectively ‘beta-test’ mobile infrastructure and devices
with domestic operators and then leverage that early experience and manufacturing critical mass into a
strong competitive market position.
Having seen global technology momentum in recent years move from CDMA to GSM, the Korean
vendors and operators have already instigated a migration towards WCDMA/HSPA. We believe that
recent developments in the US could once again see Korean technology policy re-orient away from
promoting Korea’s domestic WiMAX standard (WiBro) and more towards establishing its LTE
credentials for the US and global export market.
Other Asian handset players with aspirations to expand their US position, such as Huawei, ZTE, and
Kyocera-Sanyo will also be impacted. Huawei and ZTE are the two fastest growing telecoms equipment
vendors in the world, but have had a limited role in domestic 2G-2.5G infrastructure contracts (ZTE has
about 7% domestic market share, for example).

We believe China is likely to continue to pursue a preference for TDD-type technologies (such as the
domestically developed TD-SCDMA 3G platform) given the country’s desire to build strong IPR
positions, and hence Chinese vendors may be forced to focus on a TDD version of LTE. Given our
expectation that operators globally will continue to favour FDD-type technologies though, we believe that
this could limit the upside for Chinese vendors, either significantly if their LTE-FDD offerings are defocused
such that they become less competitive, or more moderately simply through global adoption of
LTE-FDD where they are likely to have a relatively weaker IPR position.

目录

Executive summary 2
WiMAX vs LTE technology
review 8
Why US 4G matters… 17
Asia 4G roadmap shifting 21
Valuation and risks 30
Disclosure appendix 35
Disclaimer 38