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NDRC, MOF Revise Wireless Spectrum Fees

China Securities Journal, 1/04/08

The National Development and Reform Commission (NDRC) and Ministry of Finance have informed the Ministry of Information Industry (MII) of new charges for use of wireless spectrum.

The charges, collected by the State Radio Regulatory Commission from mobile operators, will be: For national GSM and CDMA networks, charges will be RMB 17 mln per MHz in the 900MHz band (including the 800MHz CDMA band); and RMB 15 mln per MHZ in the 1800MHz band. For non-national GSM and CDMA networks, charges will be RMB 1.7 mln per province per MHz in the 900MHz band (including the 800MHz CDMA band); and RMB 1.5 mln per province per MHZ in the 1800MHz band. Operators using spectrum in ten or more provinces will be charged according to the national standard.

Charges for the spectrum currently shared by the Ministry of Railways and China Mobile (NYSE: CHL; 0941.HK), 885-889/930-934MHZ, will cost RMB 8.5 mln per MHz. While this spectrum is shared, each will pay 50% of the total, with the Ministry of Railways to pay the full cost once China Mobile ceases use.

The charges came into effect as of January 1, and will remain in effect for five years.

LENS: The newly revised wireless spectrum fees will have relatively little impact on China Mobile's and China Unicom's margins in the coming years. Compared with the previous rates, those for the 900MHz band (including the 800MHz CDMA band) have been increased by only RMB 2 mln per MHz per year (from RMB 15 mln to RMB 17 mln), while those for the 1800MHz band have not been increased at all.

China Mobile uses 48 units of 900MHz spectrum, so will pay an additional RMB 96 mln a year under the new standards. China Unicom uses 12 units of the GSM 900MHz and 30 units of the 800MHz CDMA band, so will pay only RMB 84 mln extra each year. Accordingly, compared with China Mobile's RMB 285 bln revenue and Unicom's 94 bln revenue in 2006, the increase in spectrum fees amounts to less than 1/10 of one percent for each operator.

Keywords: NDRC Ministry of Finance MII spectrum State Radio Regulatory Commission tariffs GSM CDMA Ministry of Railways China Mobile CHL 0941.HK wireless

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